Eleutherian

I'm a little behind in responding to this story, but as long as Americans continue to smoke cigarettes, calls to increase taxes on the purchase of cigarettes will also continue. Reuters reported in a one-sided story that a $1 per pack tax increase on cigarettes would "reap" over $9 billion in increased tax collections.

The story quotes John Seffrin, chief executive of the American Cancer Society Cancer Action Network:

An increase in tobacco tax rates is not only sound public health policy but a smart and predictable way to help boost the economy and generate long-term health savings for states facing deepening budget deficits.

The American Cancer Society, in conjunction with the Campaign for Tobacco-Free Kids and various other advocacy groups, have long touted increased taxes as a means to deter smoking, often under the guise of increasing tax collections. These are two separate motives, and I will address each separately.

First, and most importantly, why do nonsmokers feel the need to FORCE smokers to quit? You should not be proud of making an activity too expensive for a person if they truly enjoy partaking in it. Some people truly enjoy smoking and do not want to quit. By making cigarettes more expensive, you will do one of two things to this type of smoker: 1. force them to spend more on cigarettes and less on other goods and services, or 2. force them to quit an activity they love. This should not be a proud moment for anyone.

The second motive is to supposedly increase tax collections for states. This, of course, assumes this is a state tax increase as opposed to a federal tax increase, as a federal tax increase will only serve to decrease states tax collections from cigarettes.

John Seffrin's quote states that cigarette taxes are a "smart and predictable way to help boost the economy." In one way, he is correct. Increasing cigarette taxes will surely boost the sales of black market cigarettes. A recent study found:

...hiking taxes $1 per pack will lead to a leap in the total smuggling rate in Washington from 39.3 percent to 51.5 percent. That is, 51.5 percent of the cigarettes smoked in the state of Washington will be contraband.

Commercial smuggling involves large-scale organizations that ship semi-tractor trailers and vans long distances and maintain complex distribution systems.

Our estimates indicate that nearly 30 percent of the smuggling will come from these commercial haulers. It’s worth noting that some of the trailers are actually hijacked from underneath legitimate truckers themselves.

In researching this post, I came across a report by the aforementioned Campaign for Tobacco-Free Kids entitled, "Raising State Cigarette Taxes Always Increases State Revenues." I have a general rule that when the title of an article contains a lie, there is not much need to read the rest of it.

For example, according to a Commonwealth Foundation study, in Pennsylvania:

After a 35 cent per pack increase in 2004, revenue fell by $72 million, and tax revenues remained below 2004 levels since then.

Of course, the more damning evidence against the projection that a $1 per pack tax increase would raise over $9 billion in new tax collections is that these projections have consistently been overestimated. The same Commonwealth Foundation study stated:

Of 57 state excise taxes imposed from 2003 through 2007, only 16 were found to raise as much revenue as projected. Thirty-nine state tax increases fell short of estimate by a range of 2% to 181%.

This doesn't exactly strike me as "smart and predictable."

Port Chester High School in New York will provide free STD and pregnancy testing for students. Unsurprisingly, the only complaints being raised is that these services will be performed without parent permission and parents will not be informed of the results.

I actually rather appreciate the privacy being granted these students, but we must not ignore the cost. Nothing is free. There are always costs, and the state of New York should understand this by now. New York has the highest per-pupil education spending in the country - $15,981 - 65% above the national average.

According to the Business Council of New York State:

New York spent $37.16 on schools for every $1,000 of personal income in the 2006-2007 school year. That was the highest in the nation and 42 percent above the national average that year. And the state collected more than $5,100 per pupil in property taxes that year -- the fifth highest per-pupil property tax collection in the nation and 60 percent above the national average.

"Free" services come at a cost. In New York, the cost is high.

The government is trying to fund health care reform. They are desperately reaching, ignoring the hypocrisy of their actions, and it will hurt America.

Taxing food and soda has been touted for months as a means to fund a government-controlled health care plan that is supposed to save taxpayers money. The hypocrisy does not end there.

The LA Times reported on the Urban Institutes's proposal to tax "fattening" foods to handle the "uncontrolled obesity epidemic." Take note of the word "uncontrolled." It is not the government's responsibility to control the eating habits of American citizens.

If you happen to be the 1-in-3 Americans who is neither obese nor overweight (and, thus, considered at risk of becoming obese), you might well conclude that the habits of the remaining two-thirds of Americans are costing you, big time.

If eating habits of other people are costing you, imagine how much taxing the food you eat will cost you. Most states exempt food for home consumption from sales tax. The federal government will take the opposite approach. This may cause states to follow suit, exacerbating the problem.

The Center for Disease Control (CDC) supports taxing both food and soda. CDC chief Dr. Thomas Freiden testified that taxing fattening foods "would be effective" at reducing obesity. Freiden and others compare the proposed 3-cent soda tax to the excise tax on cigarettes. Let's talk cigarettes.

The Urban Institute reports:

Facing the serious consequences of an uncontrolled obesity epidemic, America's state and federal policy makers may need to consider interventions every bit as forceful as those that succeeded in cutting adult tobacco use by more than 50%

The federal tax on cigarettes now stands at $1.01 per pack or about $10.10 per carton. On top of this incredibly high tax, individual states apply their own tax on cigarettes, ranging from $.07 in South Carolina to a high of $3.46 per 20-pack in Rhode Island. With such excessive taxation, it is very understandable that people were financially forced by the government to quit smoking.

However, a 3-cent tax on soda will not cause people to change their drinking habits. If anything, it will cause soda prices to go up by at least 5 cents at vending machines to compensate for the tax and exclude the need for pennies. The government will fail at reducing obesity (a task with which it should not be worried) and increase the profit of vending companies and perhaps even soda companies.

Additionally, the Urban Institute ignores the changing social attitude toward cigarettes that greatly contributed to their tobacco use reduction statistic. There is no need to financially force U.S. citizens who want to engage in a certain activity to cease doing so. The social attitude toward healthy eating and drinking is changing now much as it has changed toward cigarettes. The government has no role in legislating morality (or eating habits).

The proposed taxation does not end there. The Senate Finance Committee has touted the idea of a 10% tax on plastic surgery. The tax would apply to procedures such a liposuction, which not only improve a person's appearance but also improves the body's health through reduced stress on joints.

The LA Times reported today that the Federal Deposit Insurance Corp. (FDIC) has proposed taxing any company which the government categorizes as "too big to fail." The collected money will rest in a "resolution fund" to be used for further bailouts.

There are several reasons why this plan is a terrible idea. First, and most obviously, this plan will punish companies for growing too successful. The United States is not a country that punishes success. In her testimony, FDIC director Sheila Blair proposed taxing companies that pose a risk to the financial system.

This is not a case of government policy having unintended, negative effects on business. Blair clearly stated the intention of this proposal, which President Obama supports: "This system also could provide an economic incentive for an institution not to grow too large [emphasis added]."

Second, Blair lied in stating that taxing large companies to fund future bailouts will come at not cost to taxpayers. In 2005, 50.3% of U.S. households owned financial equities such as stock and mutual funds. This is up from 49.5% in 2002 (which may not seem like much but represents an increase of more than 4 million households). As such, taxing these large companies constitutes taxing roughly half of American households.

Finally, the FDIC's proposal encourages large businesses to engage in risky behavior. The stated purpose of the funds is to bailout these large businesses in the future. If a bailout is guaranteed, it reduces the risks involved in the same activities that caused the current financial recession.

To summarize, the FDIC and President Obama support imposing a new tax on large companies that pose a threat to the financial system for the specified purpose of discouraging companies from growing too large, while encouraging these same companies to engage in risky financial transactions by guaranteeing a bailout -- all at a cost to taxpayers.

Researchers at the University of Iowa are currently conducting field tests on technology to replace the current gasoline tax with a by-the-mile road tax. These tests utilize GPS devices installed in vehicles to log the number of miles driven. Before I get into the complications that arise from such a move, officials endorsing the road tax believe:

...the traditional by-the-gallon fuel tax, struggling to keep up with road building and maintenance demands, could fall even farther behind as vehicles' gas mileage rises and more alternative-fuel vehicles come on line.

Basically, their argument is that because vehicles are becoming more fuel efficient (at least partly as a result of government mandates), the established tax on gasoline no longer provides enough money to "properly" fund road maintenance. (I'm sure you can deduce why "properly" in is quotations).

I decided to list complications of this switch in list form. If you think of anything I missed, comment, and I may choose to add your suggestion.

1. Privacy - I don't know about you, but I don't want the government lojacking my vehicle for any reason. Even if the bill's language includes specific references to the use of the information, simply having the device already in place makes it easier for the government to go further with the collected information in the future.
   
2. Environment - Presently, the gasoline tax serves a dual purpose. It funds road maintenance and discourages consumption (thus promoting research and development into alternative fuel sources). Switching to a road tax adds a new tax to owners of electric vehicles (and increases taxes for owners of more fuel efficient vehicles). The government may also be pressured to institute a separate excise tax on gasoline, effectively making this tax shift into a new tax.
3. Stolen Vehicles - The road tax adds a new complication to victims of vehicle theft. Not only will the victim be left without a vehicle, but may also potentially have to pay a tax on the miles driven by the thief.
4. GPS Capacity - I am no expert on this subject, but will the current Global Positioning System (GPS) have the capacity to relay information from every vehicle in the country?