Good Intentions Go Up In Smoke
Mar. 14, 2015 (Mimesis Law) — In doing some research, I came across a report prepared by the New York State Department of Health. In June, 2008, the state doubled the excise tax on cigarettes, those lawful burning sticks that everyone despises. The reason was simply stated:
These actions have the potential to appreciably reduce cigarette use and increase tax revenues to the state.
A double-bagger, better health for all plus cash in the state bank. What’s not to like? The reality, perhaps.
Cigarette purchases that avoid taxes decrease potential revenues to the state by between $467.5 million and $612.8 million per year and undermine the public health benefits of the cigarette tax increase.
In the year since the tax increase, from June 2008 to May 2009, cigarette excise tax revenues collected by New York rose 54%, to $1.31 billion, while tax-paid cigarette sales decreased 22.8%.
No significant increase in quit intentions or quit attempts has been noted since the June 2008 tax increase.
In other words, it didn’t work. At least not the way everyone assumed it would. The state ended up with higher tax revenues, though not nearly as much as they thought they would. In the meantime, businesses that sold cigarettes in the state suffered a substantial decline in revenues. And smokers kept on smoking.
The key to the last piece is that this was a doubling of an earlier onerous imposition of excise tax on cigarettes. The first time out of the box, the excise tax rid the ranks of smokers of those who were price-sensitive. But once they were gone, further increases made no significant difference.
What it did was drive business to the Internets. What it did was drive business away from legitimate brick and mortar businesses in the state who were struggling to survive the recession. What it did was . . . not what people thought it would.
Among the fixes growing out of this realization was the Internet business killing the state’s ability to micromanage its citizens. Worse still, it was turning those citizens into tax scofflaws, buying untaxed cigarettes online at a fraction of what they cost in state, and in contravention of laws requiring citizens to pay use tax on untaxed purchases. This made a lot of people into instant quasi-criminals, even though they may not have known (as most people don’t) that they are obliged to pay taxes if a seller doesn’t.
Did New York recognize the error of its theory? Well, of course not. Instead, they looked to yet another tweak that would provide the solution that eluded the state:
Finally, the July 2010 implementation of the federal Prevent All Cigarette Trafficking Act should effectively eliminate the sale of untaxed tobacco products over the Internet. Based on the findings of this report, it is clear that enforcing these new policies to reduce tax evasion is critical for New York to realize the full public health benefits of the 2008 and 2010 tobacco tax increases.
Just one more, one . . . itty . . . bitty . . . thing more, and then we will achieve the Nirvana of a smokeless society. And here we are, 2015, and people still smoke, and pretty much with the same prevalence as before.
Now you probably think this is all a prelude to other, similarly well-intended by ineffective, or more accurately, counter-productive efforts to achieve the Perfect Society, like, say, legalizing marijuana. But then, I would engage in such a facile transition given your sophistication, not to mention the well-documented evidence of what weed does to youthful chastity. Oh no, never.
But it does compel me to think like a Freak, eschewing inherent bias with its banal connections between cause and effect, and instead taking a fresh look and trying to figure out ways to make gardens weed themselves.
The theory underlying New York’s attempt to rid itself of demon tobacco and earn a few bucks in the process made enormous sense and was utterly misguided and counterproductive. Ironically, it did make internet cigarette sellers pretty happy, as every time the state upped its excise tax, they could increase their prices, still come in miles below legitimate sellers and pocket the difference.
Kinda like drug dealers, except I would never go there, because it would be wrong.