The Missing Words
This morning’s Sun headline is almost good: Cutting deficit with smoke. Problem is, the headline writer forgot to say “and mirrors.”
It is very hard to rationalize as I have noted before the concept that cutting the deficit through a tax that is simultaneously intended to raise revenue and reduce the occurances of the behavior being taxed is the definition of the law of diminishing returns. Through raising the tax, casual smokers will quit, and addicted smokers will buy their smokes elsewhere. This is as much a social engineering project as it is a “revenue enhancement.”
Even Governor O’Malley understands that concept:
“There are some that want to expand health coverage in Maryland with that tax, and yet that tax is a declining source of revenue,” O’Malley said.
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A $1 a pack increase in the tobacco tax would be worth about $220 million in the first year but less after that as higher prices encouraged people to quit smoking, according to a fiscal analysis by the Department of Legislative Services.
So I ask this: why bother? Is it truly a revenue enhancement designed to close the budget gap, or is it a part of the larger social engineering experiment designed to wipe out what is still a legal behavior?