Turning Up the Heat on Smokers

Laws should be enforced (or stricken or modified if they will not be), but there’s something unseemly — extortionate — about this:

The state in April increased the excise tax on cigarettes by $1, to $3.46 a pack, the highest in the country. The move has obvious health benefits, but it also aims to generate millions more dollars for the financially strapped state.
Now, state taxation and law-enforcement officials are poised to do their part. They are cracking down on the illegal sale of out-of-state cigarettes to make sure that the state collects as much money as possible from smokers who now plunk down some $8.35 for a pack. …
Under state law, Rhode Island residents can have up to a carton of out-of-state cigarettes in their possession. Anything more and they are subject to arrest.
Violators face up to three years in prison and a $5,000 fine.

For reasons unrelated to money, I quit smoking about a decade ago, and it’s increasingly difficult to comprehend what drives people to continue with the practice, but reading today’s article, I found myself surprised to recall that it’s about a legal product. The state government is facing tough financial times, so it has arbitrarily decided to collect more money from a population of residents who have a chemical and psychological dependency on a particular item.
Here’s a clue that something isn’t right with the current government attitude: Resident smokers’ doing the right thing by their health would do more harm to the state revenue than does the illicit behavior on which the state police are so focused. If only for that reason alone, Rhode Island’s smokers should kick the habit.
Do what they will, however, I’ll still predict that revenue from this tax is going to go down, even if the number of smokers stays exactly the same. Unfortunately, Rhode Island businesses are likely to take a hit, as well, and not only on sales of cigarettes, but also on sales of such goods as smokers will pick up when they’re out of state shopping.

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joe bernstein
joe bernstein
12 years ago

Costantino is trying to push an “Amazon tax”like NY has to tax online purchases-this type of thinking combined with the penalties that Obama’s new credit card law will put on responsible cardholders will put the online sales industry in the crapper.
The social engineers/big government types are always trying to stifle entrepeneurship unless they are assured of their “cut” to dole out to people who never worked or aren’t even supposed to be in the US.
It’s just like Obama to want to make people who didn’t overspend with their credit cards carry those who did.
When this guy said he wanted to redistribute wealth he wasn’t kidding.
Of course the foodie and his wife are in that select circle of arugula snapping elitists who will never be affected by any of this.
We have lots of “mini-Obamas”in the Statehouse.
I heard a good point made on matt’s show last night.It was about Karen Malcolm of Ocean State Action demanding this and that of the legislature.Just who the hell is she to demand anything?
The unions,it was mentioned,at least represent people who work and pay taxes.
Ocean State Action is a cesspool of radicals,many from Brown University.
With ordinary people facing layoffs and increased prices for utilities and other family financial crises,here comes this Malcolm woman barking at us to shell out more.
She has her pet dogs in the legislature(insert name here),but hopefully sanity will prevail.
We still have the Poverty Institute turds yapping for more also.It never ends.

Mario
Mario
12 years ago

I wouldn’t expect revenue to go down, but it will probably produce less than it could at a lower level. Last year I tried to figure out the price at which the cigarette tax would begin to raise less money and concluded (after a relatively quick and dirty analysis, mind you) that it was about $7.86 (in 2008 dollars). At the very least it was somewhere in the range of $7.77 to $8.88, but I thought $7.86 was most likely. At the time, that was far above the normal price, so I figured we had nothing to worry about. Wrong again, I guess.
In any event, even if the tax has risen past the peak of the Laffer curve, that wouldn’t necessarily mean that it will raise less money, assuming that the increase caused by raising the tax up to that point was more than the decrease the excess raise caused after. Since we’ve never been at this point before, there’s no data to model the steepness of the drop-off. In any event, lowering the tax 20 or 30 cents would probably make us a little better off, if the behavioral changes have not yet kicked in or are reversible.
As to your main point, yes, balancing our budgets on the backs of a small subset of people simply because we have decided that they are ok to hate is a bad way to run a government.

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