Wednesday, January 2, 2013

Somebody's Smoking Something

One of the main reasons given for the cigarette tax (in addition to raising revenue) is that it acts as a disincentive for people to smoke. And it appears to be working quite well, this tax (the smoking rate has in fact dropped)....Which makes me kind of wonder out loud. If politicians are able to see how taxing cigarettes makes the smoking rate go down, why aren't they then able to see how the taxing of savings and investment can have a similarly deleterious effect on those two things? Stubbornness? Stupidity? Envy? I mean, I don't know.

10 comments:

Rational Nation USA said...

Food for much thought. I would be particularly interested in responses from progressives to your questions.

Will "take no prisoners" Hart said...

It's like with the luxury tax under Bush 1. They thought that it was going to raise oodles of money and the only thing that it did was wreck the yachting industry in Rhode Island. No foresight at all.

BB-Idaho said...

Probably depends on whether a tax
is a revenue source or an exercise in social engineering. Wouldn't fly, but considering the taxes and licensing of some 240 million automobiles, the 270 million firearms would seem a 'progressive' target. Taxing
income is interesting from the POV
that the income source tax rate
depends on how the income is earned: to paraphrase Orwell...
'all income source is equal, some more than others'. Sin taxwise,
my Prince Albert pipe tobacco that
cost $4.50 a can back in the 60s
is going for $38.85 now..almost all tax. Like the yacht problem,
in 1970, Americans bought 52 million pounds of pipe tobacco. In 2004, they bought less than 5 million pounds. (had to sell the yacht and keep my pipe)

Will "take no prisoners" Hart said...

Sometimes the goal IS to raise money and sometimes that goal isn't met.

dmarks said...

Taxes should be as neutral on behavior as possible. Anything else is government forcing its own morality on people.

By the way, Will, what do you think of the major provision of Obamacare designed to discourage employers from having people work more than 30 hours a week?

BB-Idaho said...

Not sure about taxing the investor, as the relationship between corporate profits vs
private investments does not seem to correlate (per
Fidelity )

Will "take no prisoners" Hart said...

I think that there's a lot of crazy things in Obamacare, dmarks. You're talking about the employer mandate, right, the fact that every employee over 30 hours a week must be offered healthcare? Yeah, that's a real messed-up incentive structure.

Will "take no prisoners" Hart said...

I don't know what the sweet-spot is, BB, the exact level of taxation where revenues are optimal. I would just caution that in a fast-paced global economy in which people, money, and corporations are mobile, it's probably best for the U.S. government to tread a little bit lightly here.

BB-Idaho said...

.."fast paced global economy"..
A few years back, my financial planner recommended Thomas Friedman's 'The World Is Flat'
(hoping no doubt that my archaic
view that mfg and consumer drove the GDP would be discarded). I was
depressed for weeks and put it in the econ section of my libarary,
a dusty seldom read shelf. Now,
I'm thinking I need to trade my
financial planner for a personal
trainer.....

Will "take no prisoners" Hart said...

I think that he's since written a second volume on the topic, probably even more depressing.