WSJ: Why raising the tobacco tax will hurt the states

[unixronin]

Higher taxes discourage cigarette sales.  Nobel economist Gary Becker pegs the long-run price elasticity of demand for cigarettes at 0.8 -- i.e., a 10% increase in price causes an 8% decline in unit sales.  The Obama tax hike translates into a 13.3% increase in the average pack price.  That implies a 10.6% decline in unit sales -- which the National Tax Foundation has calculated adds up to a $1 billion overall revenue loss for hard-pressed states.

[...]

None of this is good for the economy.  Consumers and state governments are already having a tough time making ends meet.  Burdening them with a new $38 billion tax and a $1 billion cut in revenues isn’t going to help create jobs.  Estimates by the National Association of Tobacco Outlets of the job losses in cigarette manufacturing and distribution alone exceed 100,000.

Smugglers and counterfeiters won’t lose their jobs, though.  Both the General Accounting Office (GAO) and the Alcohol, Tobacco, and Firearms (ATF) agency have concluded that the multibillion-dollar cigarette-smuggling business grows with every excise tax increase.  The ATF and GAO also believe that cigarette-smuggling is a form of cash laundering and profits for both organized crime and terrorist organizations.

Comments

[milktree.livejournal.com]

I see the point the author is making, and I don't disagree with his conclusions (they seem to make sense) but I'm having trouble getting worked up about this. It's probably because I'm one of the people whose nose and throat and eyes stop working when exposed to cigarette smoke, it's incredibly unpleasant to me, even the smoke that hangs out in the clothes of smokers.

And... well... Nobody denies the health benefits of quitting smoking, and a healthier population is good for everyone.