The government that steals from Peter to pay... Peter?

[jackofallgeeks]

When given the choice between standing with big tobacco companies and standing with kids, I stand with America's children," said the chairman of the Senate Finance Committee Sen. Max Baucus when presented with the fact that a proposed bill to fund health care for low-income individuals would be funded by an increased tax on low-income individuals. (Article.)

The implied premise being that raising taxes on cigarettes 61 cents constitutes "an increased tax on low-income individuals." Judging from the smokers I've known, and assuming many low-income individuals are also smokers, that premise holds. Smokers aren't going to quit because the cost raises. One of my smoker friends gleefully recited a comic (don't remember who, exactly) who said, "you could put them in black boxes with big red skulls on the front, call them Tumors, and charge $100 a box and we'd still smoke them by the case."

Sen. Baucus gives us a nice little sound bite that he can tote about for a couple years -- *I* think of the children, he tells us, not Big Tobacco -- but he's missing the point. Taxes aren't going to hurt Big Tobacco, not really. Law suits and constant customer death hasn't *really* hurt Big Tobacco, and neither is raising the price (again). What WILL happen is that the children of low-income smokers will suffer because their household will be spending more on cigarettes in order to fund the welfare which, in all likelihood, they will be denied. Thirty-five billion dollars is a nice sum of money, but it's not going to help everyone, particularly if by funding it you make more people need it. And don't you think the children of smokers are *more likely* to need health care?

Comments

[dikaiosunh.livejournal.com]

Actually, price hikes (via taxes) do seem to have an impact on smoking rates. A couple minutes with Google turned up a CDC report: http://www.cdc.gov/tobacco/data_statistics/sgr/sgr_2000/index.htm

Chapter 6 discusses economic impact on smoking (http://www.cdc.gov/tobacco/data_statistics/sgr/sgr_2000/00_pdfs/chapter6.pdf) and surveys a bunch of demand/price studies. Basically the point is, though, that while the addictive factor certainly impacts the price elasticity of cigarettes, it doesn't make it zero (which is what your argument implies). Also, keep in mind that some of the price effects operate through deterring new smokers from entering the market, in addition to getting some existing smokers to quit or reduce their consumption.

As for your second argument... it's not that low-income folks smoke more (I haven't seen real strong evidence for this, but it's not my field). In any event, it doesn't much matter - almost every consumption tax is effectively regressive, since the lower your income the more of it you spend relative to savings/investment overall. The CDC report has an interesting discussion of the overall welfare effects on various quartiles, but at best it seems that you can fiddle with other things to make the tax almost proportional, not really progressive. I'd agree that that's a strike against it, but it's not a lethal blow. If you want to fund S-CHIP through a tax on yachts or capital gains instead, I'm all for it. But considering that tobacco causes health problems, it strikes people as politically attractive to tax tobacco to pay for health care. I think it's as much about punishing smokers as punishing Big Tobacco, though - in fact, you're probably right that BT isn't hurt, the CDC study seems to indicate that the price of a pack of cigs typically goes up by more than the tax increase (a common effect in deeply imperfect markets).

Even if the tax falls disproportionately on lower-income folks, it's still not a matter of just spinning your wheels. Some smokers are higher income, so if tax revenues come from across the board but benefits flow to the bottom only, that's still a net transfer from the better- to worse-off.

In addition, it's not as if a dollar spent on S-CHIP through taxes straightforwardly displaces a dollar spent on health care by the poor family with smokers, even were we to grant that this smoker's behavior won't be changed by the tax. People aren't always rational, especially about things like long-term or preventative care, so "forcing" someone to divert that dollar to S-CHIP may be beneficial. It may get diverted from something else less beneficial. Or even if it gets diverted from, say, food (which I think is a fairly implausible picture - it requires us to believe that there are lots of poor folks going around who will deprive themselves or their children of food because they are so invested in relative luxury purchases), $1 of preventative care is often very valuable.

The other thing is that, given the completely dysfunctional state of our health=care markets, I think it's invidious to refer to S-CHIP as "welfare" and be done with it. Affording health insurance without a job or government support is needlessly difficult in our system, and affording serious health care without insurance is nigh impossible.

The Insider...

[ambereternal.livejournal.com]

You're not entirely correct in some of your assumptions. First of all, the tax increase will effect Big Tobacco, because it isn't just a tax increase on the price of cigarettes. That bill also includes a tax increase for B.T. in the production of cigarettes, which will hit them an an uncomfortable place. Also, the majority of that thirty-five billion is going to be spent (if this passes!) in the state prevention and cessation programs.

Also,<\b> if the FDA bill passes to have the FDA regulate the production and sale of tobacco products, low-income families needing serious health care due to tobacco related illnesses, or children from smoking households who can't afford health care will begin getting the help they need.

Seriously y'all...call up your Senators and Representatives and let them know how important the FDA Tobacco Regulation Bill is to you!

[bsgnome.livejournal.com]

I realize this wasn't your principle point, but Re: Stealing from Peter to pay ... Peter? If you ask me, it makes an amount of sense. If the plan is to benefit Peter, it makes sense that Peter should have some hand in paying for the benefits.

The theory breaks down when Peter doesn't need the benefits, or when he needs benefits not covered by the plan. I'm really uncertain of what I think is best, however.

If you will, imagine Government as a form of business which provides the service of governance. Citizens are the clientele, and taxes are the bill. Now then, all citizens, in theory, receive the same services--the same benefits--ideally, within the same proportion. So, taxes become unjust when they are improportionate.

That's all I care to say for now, as it's not something I've put a whole lot of thought into.

[singinteenangst.livejournal.com]

wow...that's a really interesting and well-voice point. thanks. you have now got me thinking......