Tax hikes up in smoke

by CalWatchdog Staff | July 29, 2010 8:38 am

Steven Greenhut: The Sacramento Bee published a fascinating story[1] on the front page of Wednesday’s paper, “Nose dive in cigarette sales slices tax revenue,” which details  how new taxes and regulations have pushed cigarette sales to “their lowest levels in a decade.” The result, though, us  the state has lost $74 million in tax revenues, given the degree to which the state has come to depend on taxing tobacco. California officials keep raising taxes on tobacco as a way to simultaneously reduce smoking and fund health programs, but as people stop smoking there is less tax money going to those programs. This is one of the most economically ignorant policy efforts imaginable — which is saying a lot given the economic ignorance at the heart of most California public policy.

Officials told the Bee that tobacco use is declining which is no doubt true. Part of that reason can probably be tied to punitive taxation and Nanny State regulations, but a bigger part of this is declining social acceptance. That’s my theory any way. But another possibility also is that people are simply buying their cigarettes from lower-tax states through the Internet — the Board of Equalization didn’t supply data on out-of-state sales. Even if it did, it’s not uncommon for Internet purveyors to under-report sales. No data was supplied, either, for black market (and Mexican) purchases which reportedly have boomed as taxes go up.

No doubt, California’s brain trusts will call for higher taxes to back fill the revenue losses. Looks like I’ll have to shift my cigar purchases to the Internet.

Source URL: https://calwatchdog.com/2010/07/29/price-of-econ-ignorance/

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