Taxing fags an unhealthy obsession
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The Preventative Health Taskforce has suggested a range of additional taxes to overcome the obesity crisis, the smoking crisis and the alcohol crisis. Let’s accept for a moment that there is a health crisis, despite Australians living longer, healthier and happier lives than ever before. Is taxation the solution? Paying more money to the government is seldom, if ever, the solution to social problems — or any other problem. Yet there is a strand of vulgar economics that suggests that this is precisely the solution to all problems. To be fair, there is a theory in economics, associated with the great English economist Arthur Cecil Pigou, that suggests that if social costs are greater than social benefits that activity should be taxed, and if social benefits are greater than private benefits that activity should be subsidised. The logic of this argument relates to downward sloping demand curves. As long as higher prices lead to less consumption, a tax on that activity will lead to less of it. This of course is one of the arguments against high rates of income tax — it undermines the work ethic. The important question is whether taxation is the best price signal that public policy can generate. Let’s think about smoking tobacco. It is true that smoking has adverse health effects on smokers and non-smokers. This is well-known and has broad acceptance and understanding in the community and the incidence of smoking in the community has fallen dramatically in recent years. At the recent Henry Review Tax Conference Sijbren Cnossen made the argument that smokers pay for themselves. After you tally up all the additional taxes and consider reduced life expectancy and the like, smokers are not a net burden on society. In economic terms there is no smoking externality in equilibrium. To be sure non-smokers are not being compensated by smokers, but smokers have paid the government in full for their habit. Raising additional taxation on smokers is then just an exercise in revenue raising. There might be a case for that, but let’s not pretend this is a health measure. In contrast to the hysteria over tobacco, alcohol abuse has far greater social costs associated with it. Alcohol abuse leads to all manner of anti-social and non-co-operative behaviour. It is not clear that drinkers pay the full social costs of their behaviour. Does this mean that alcohol excise should be increased? Only if we believe that drinkers should pay for their anti-social behaviour in monetary terms. It is not clear that increasing the monetary cost of alcohol has a large impact on consumption. To the extent that it doesn’t, drinkers simply swell the coffers of the federal government while state government agencies clean up the mess. Economists can calculate a monetary value of street brawls with the police and so on. But we don’t want to be compensated for urban violence — we want it to stop. Furthermore, many people would be doubtful that an economic estimate of these costs fully captures the human cost of anti-social behaviour. It can’t really be measured at a personal level. An increase in alcohol excise can only ever be used to heal the physical damage. This is not to suggest that economics can’t offer a solution to anti-social behaviour. When the profit motive cannot operate well, there are bureaucratic solutions that can be employed. The education system is one such solution; government and community groups have undertaken massive education programs with some success. Another bureaucratic process is the criminal justice system. This, too, raises the price of anti-social behaviour but does not swell the coffers of government. So far the authorities have targeted venues — raising the price of liquor licences across the country. But unless these licence increases directly translate into more police resources, such a measure will be little more than punitive. Increased taxation of alcohol itself, and by implication increased health spending, may benefit the medical profession but it is not clear it will solve the social problems associated with alcohol abuse. Sinclair Davidson is a professor in the School of Economics, Finance and Marketing at RMIT University and a senior Fellow at the Institute of Public Affairs. |
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32 Comments
Sinclair, you are in complete self-contradiction here, though at least you’re more coherent than your colleague Tim Wilson.
In the first half of this article you argue that smokers are paying for their cost to society, their lives, and the lives of others, in monetary terms.
In the second half, you argue that drinking shouldn’t be taxed, because we don’t want to be compensated for the damage caused by alcohol, e.g. increased urban violence, in monetary terms, “we want it to stop”.
Why shouldn’t the same apply to dying of lung cancer? It may be nice for a hypothetical smoker dying of lung cancer to know that he has paid in full for the cost of his health care, his lost productivity, the damage caused to those around him through secondhand smoke, but I suspect he would prefer not to die. Just as most of us would prefer less street violence to receiving compensation for it afterwards.
As you say, “many people would be doubtful that an economic estimate of these costs fully captures the human cost of anti-social behaviour [or, for that matter, the human cost of having one’s self, one’s loved ones, friends and colleages die early of lung cancer]. It can’t really be measured at a personal level.”
If we don’t want people to die early, then we need to provide disincentives to risky, addictive behaviour, especially behaviour where the benefit is felt now and the cost later (something humans are extremely bad at assessing). Higher prices are one of the best disincentives there are to smoking, drinking and other risk behaviours.
Raising taxes on smoking and drinking is not “just a revenue raiser” but a way of saving lives. And if it raises revenues as well, revenues that can be used for better public services or to cut taxes that don’t create positive incentives (e.g. income tax, payroll tax, stamp duty), where’s the harm?
Seriously, two articles from the IPA on consecutive days decrying new taxes being levied upon the tobacco and alcohol industries?
“After you tally up all the additional taxes and consider reduced life expectancy and the like, smokers are not a net burden on society.”… “but smokers have paid the government in full for their habit.”
Not once do you mention the decline of tobacco use being correlated to increased taxes. Instead, you take a bizarre turn, seeming to suggest that it’s all good now that the government has balanced the taxes on cigarettes with the health cost of tobacco related illness.
Apart from being morally disgusting, it’s sloppy of you to state tobacco pays for itself without citing any empirical, peer reviewed evidence to back it up.
“In contrast to the hysteria over tobacco, alcohol abuse has far greater social costs associated with it.”
You’re drawing a very long bow by comparing the cost to the health system from tobacco related illness to the ‘social’ cost of alcohol abuse. You may as well have compared the price of fish in Shanghai to the entrance fees at Seaworld.
“It is not clear that drinkers pay the full social costs of their behaviour.”
“It is not clear that increasing the monetary cost of alcohol has a large impact on consumption.”
“Increased taxation of alcohol itself, and by implication increased health spending, may benefit the medical profession but it is not clear it will solve the social problems associated with alcohol abuse.”
If you are so uncertain about all of these things, perhaps you should do more research into the matter before claiming that there is no reason for increased taxation to dissuade alcohol abuse.
“When the profit motive cannot operate well, there are bureaucratic solutions that can be employed.”
For someone representing an alleged free market think-tank, I would have thought this statement a blasphemy. But it seems that the philosophy of your article revolves around blatant corporatism as opposed to free market ideology.
Jamesh: Do you work for an Ad Agency that’s just been given a couple of mil to brainwash us with those stupid anti-smoking ads on tv?
Some of what you said is logical, but….SMOKING DOES NOT CAUSE LUNG CANCER!!!
http://www.journaloftheoretics.com/Editorials/Vol-1/e1-4.htm
BTW…I don’t smoke either.
Raising additional taxation on smokers is then just an exercise in revenue raising
But also an exercise that will make the Prime Wowsers biggest fans happy. They get to look down on the people who smoke and or drink. If it was a health issue then we would be talking prohibition not taxation.
(((((Raising additional taxation on smokers is then just an exercise in revenue raising))))
Yes, …create the problem, even when it does n’t exist…then grab the moral high-ground and provide the fix. In this case the fix is increased and lopped-sided taxation which is always ruthless in servitude to the Sherrifs of Nottingham at the serfs expense.
((((But also an exercise that will make the Prime Wowsers biggest fans happy. They get to look down on the people who smoke and or drink. If it was a health issue then we would be talking prohibition not taxation.)))))
Yep!!…you got it.
Yeah Garry “The Journal of Theoretics” hey. Talk about your crackpot journals of record.
Whilst I could waste my time and other peoples in rebutting every ridiculous thing in that article, instead I’ll just make it easy.
http://www.quitnow.info.au/internet/quitnow/publishing.nsf/content/warnings-b-lung
The federal government’s quit website lists one of the mandatory graphic warning labels required as “Smoking Causes Lung Cancer”.
Does anyone except the congentially stupid, think that the Tobacco industry if it had any valid evidence against that assertion wouldn’t have fought tooth and nail to prevent it being required to be printed in big letters on their products?
who cares if people smoke, let them die, its not the government’s job to save people from stupidity. They cant do much more to warn people, if they choose to still do it then make sure they cant claim medicare or any health benefits towards smoking related causes of ill health. let them die. This is another example of the way the Rudd government is trying to socially engineer our nation.
Let people kill themselves, its their lives. If their smoking affects others, i.e kids ect, let them be put up for charges in the magistates court. Make it as hard as possible to be a smoker, but dont ban it. After all these retards help keep the funeral business in vogue. We need people to die, might as well be stupid people.
Im a non smoker, but i have no sympathy towards people who smoke, if they die they die. And thats coming from someone who has lost family members to smoking. I felt for the kids and partners, but not for them.
thats compassionate conservatism
MADEINAUSTRALIA:
Did n’t your mummy give you any soft toys when you were a baby?..it sure shows.
In this country there is only one thing worse than the Looney Left and thats the Extreme Right….I can’t make up my mind about that, but somewhere in the middle is fair ground and I say to you…go and find it.
The article is not about smoking you idiot. It’s about justifying the raising of rediculous taxes as a pretext to stop people from smoking.
You obviously did n’t read the link, so stop it with your Right Wing Spin.
“This is another example of the way the Rudd government is trying to socially engineer our nation.”
Seriously. People have to stop using the term “socially engineer” when they clearly have no idea of what it means, or when to use it.
There are quite a few things that I don’t give a rat’s arse about, and very near the top of that list is tax on cigarettes, so tax the bastards out of existence for all I care and use any rationale you like.
Well, taxing drinkers just makes drinkers’ families poorer. Same with taxing gambling. Our governments also now tax p*rn. (The ACT, when it was an oasis of legal p*rn, actually ran an interstate ad campaign promoting the fact.) So much for the old trifecta of organised crime.
So if Rudd says “let’s tax the smokers even more, they are awfully obliging folks because they feel so embarrassed these days”, well and good but he’d better be consistent. Legalize cocaine and tax it. Tax sugary junk food, which is probably causing a lot more health problems and early death than smoking right now, and at a much earlier age, than smoking. The hunger pangs of binge eaters will still win against correctness every time but by Jesus it will cost them. Tax being a climate-change denier: you still have free speech, but nobody ever said ‘free’ was “FREE!!!!”. Tax Aboriginals if they choose to live far from a Nikola Roxon-approved town centre, as that is clearly bad for your health too and just damned inconsiderate.
“Paying more money to the government is seldom, if ever, the solution to social problems” why does one get the impression from Sinclair,Tim & their ilk at the IPA that the money shoulod be given on bended knee to whatever BigCorps fund their shill factory?-
Jenny Macklin-approved I mean. You know what I mean.
Jos Cull:
(((((Talk about your crackpot journals of record)))
Crackpot eh?…then you explain to me how the facts presented in that article are crackpot?
((((The federal government’s quit website lists one of the mandatory graphic warning labels required as “Smoking Causes Lung Cancer”.))))
Ok then…it must be true, sorry.
MADEINAUSTRALIA: “After all these retards help keep the funeral business in vogue. We need people to die, might as well be stupid people.”
Talking of stupid people … oh, gosh, shall I break the terrible news to him or does someone else want to do the honours?
Bullmores Ghost:
What is Bullmores Ghost anyway?…are you saying that Bullmore actually drowned in that upturned yacht down in the Southern Ocean and that the R.A.N actually rescued a ghost?
Did his ghost pay for the rescue like Tim Holding did n’t?..hehehe…or did Bullmore survive in his upturned yacht by chewing on a chore of tobacco?…these are the questions.
Cigarettes are a vehicle for people to get a nicotene fix. Most smokers started the habit when they were too young to know better and are now physiologically addicted.
The government can’t just ban cigarettes outright, because that would create a dodgy black market. We need to reduce demand. Banning promotion, grotesque ads to show the risks, and gradually raising the price has had massive success in reducing our smoking rates.
Every person who quits smoking has not only improved their future quality of life, but also their children’s, and the people around them.
The counter arguments seem to be “let them die, they deserve it for getting addicted in the first place”, or “poor people have such crap lives anyway, why should we care what they do for a hit”, or “the taxes we already get balance out the medical cost of smoking”.
Talk about heartless.
The issue with Cigarette, Alcohol and drug abuse (the word abuse is significant except in the case of cigarettes because smoking is just stupid). coupled with anti social behaviour is that there are just no consequences for peoples behaviour. The Government is expected to just pick up the TAB or to spend money to treat symptoms and not address the cause.
AT the end of the day it is “our” money and Governments will reposnd to the public demand (votes is the key indicator). Unitil as a society or as communities we choose to act on the displeasure we surely all feel we will be led by the minority special interest groups who are very good at influencing public policy and debate.
There is another problem you have all forgotten. When the tax becomes prohibitively expensive, people seek to avoid it, just like Kerry Packer hired good tax accountants and lawyers to avoid paying too much income tax, so too, will drinkers and smokers, avoid the tax, by making their own home brew and buying tax free “chop chop” tobacco.
I find the laying of this groundwork pretty disgusting by the Rudd government. Smokers for the most part are the poor and low-income people of our society. If they gave a rat’s about health they’d ban alcohol but despite how much more of a negative effect booze has on our society than smokes they know they’d be out at the next election. This testing the air stuff is purely revenue driven.
Also for people that try to make the argument about smokers costing the health system an arm and a leg a few facts courtesy of Crikey’s David Gillespie, smokers cost the health system $318m annually yet the government gets an extra $6 Billion in taxes from them soon to rise to $8 Billion. Smokers are the best friends any government could ever have.
That is why this supposed Labor government is willing to spit on the poor and low income earners by raising the taxes on cigarettes but of course don’t care enough about their health to ban cigarettes.
Good comments Geoffrey and Big Val, in my experience most people addicted to nicotine are those least able to afford cigarettes. An ex smoker myself I abhor the blatant revenue raising which impacts incredibly on those on the bottom rung of the social ladder. To an addict, cigarettes come first, and everything else, including food for the children, etc, comes second. Smoking rates have been falling, but due, I would suggest, more to education and health programmes than increasing taxes. Smoking is an abhorrent habit, but dont blame the addicts or tax them into misery, educate and help them and their hapless families.
Michael Crook “in my experience most people addicted to nicotine are those least able to afford cigarettes.” “To an addict, cigarettes come first, and everything else, including food for the children, etc, comes second.”
Good points Michael, and all the more reason we have to stamp out demand by breaking the cycle that creates new smokers. As you mention, smokers are disproportionately poorer, so it’s pretty clear that they will be less likely to start in the first place if ciggies are expensive.
Education, scare tactics, and raising taxes have already saved a generation of Australians from the habit. For those already addicted, it would be a lot more compassionate if the government heavily subsidized nicotene patches and other therapies using the increased taxes.
I support the raised tax on smoking with one exception. Make them free for every anti government nitwit at the IPA. In fact make them compulsory. Make it extra if you are a professor that works at the IPA, they can smoke double the rate. That way they could stick up for their dopey anti-government nutjob theories and strike a blow for individual freedom at the same time. Seal all the windows and let them choof away on extra strong camels for the rest of their days, waving the flag of freedom and supporting a business entirely legitimate in their eyes. Everyone’s a winner that way, them because they get to put their mouth where the corporate money is as per usual, us because we might have to suffer their loopy “leave it to the market” rants a little less in the fullness of time. Go on IPA boys, light up, you know its good for you…..
PS Im waiting for al those who via some twisted logic think that raising taxes on smoking is picking on the poor to start arguing for subsidised durries for those of low-income… why stop there, why not make them part of our overseas aid packages, the poor poor of developing countries are being shamelessly prevented for incurring horrific cancer deaths because they can’ afford smokes, how unjust, oh the humanity. Give me a break people. Jacking up taxes means less people smoke and less die of lung cancer. If you want to save the poor try some other tack and spare me the IPA induced social consience.
“smokers cost the health system $318m annually…”
I hate to break the news, but that figure is, simply, wrong.
Now, either you are a troll who doesn’t know how to search the internet for official figures, or you are a troll who doesn’t know how to search the internet for official figures.
Which is it?
GEF05,
http://www.crikey.com.au/2009/07/09/the-politics-and-health-consequences-of-taxing-sin/
Thank you, come again.
Big Val,
12,026.2 ($m) (Tangible only)
http://www.tobaccoinaustralia.org.au/chapter-17-economics/17-3-the-costs-of-smoking-to-australian-society
/tag
//you’re it
Yes, I know I’m getting into this a little late, (very annoying when life gets in the way of a good Crikey stoush) but this kind of stuff makes me nuts.
The anti-smoking zealots do themselves a grave disservice when they disseminate information that is patently untrue. It makes everything they say suspect, and it is thus far harder for smokers to hear and understand the genuine health warnings.
Smoking causes emphysema and is a contributing factor in heart disease and stroke. This is undeniable fact, and most long-term smokers know the truth of it because they can feel the beginnings of it in their heart-pounding breathlessness as they climb a flight of stairs.
Smoking, however, does NOT cause lung cancer. If it did, more smokers would be dying of it. Australian Bureau of Statistics recorded just over 7600 deaths from trachea and lung cancer in 2007 (an increase of about 13% on the 1998 records). Smoking rates in Australia have dropped from 34% in 1980 to 19% in 2007 http://www.tobaccoinaustralia.org.au/chapter-1-prevalence/1-3-prevalence-of-smoking-adults in 2004 about 5% of deaths were caused by lung cancer. http://www.biotechalliance.org/clinicaltrials/demography.aspx Basic maths and common sense should be able to join the dots here.
So called passive smoking is not dangerous for healthy adults. It’s unpleasant, it smells bad, hurts your eyes, makes your clothes and hair stinky and can even make you feel a bit sick if you are not a smoker yourself. Tell smokers that, tell them that is the reason you send them all outside. That is fact and most smokers will understand it, carrying on about passive smoking as something harmful is just blatantly bullshit. http://www.bmj.com/cgi/content/full/326/7398/0 (written by a medical doctor and an anti smoking campaigner).
Taxing smokers is not going to have any effect on lung cancer. It’s going to raise government revenue and placate the anti smoking zealots, but it will have little or no effect on smoking levels. Addicts will always find a way to feed the addiction.
If you genuinely want to reduce smoking stop turning it into a moral crusade and deal with the facts. You’ve always got a far better chance of having people listen to you if you can manage a rational explanation rather than proselytising hysteria.
Jane Shaw:
It’s almost impossible for people to accept the available facts when they come up against the institutionalized indocrination that has invested within it’s self millions of $$$, untold careers, professional reputations and a thousand egos.
Out goes the truth and in goes the “agenda” and then comes the spin.
Thanks for your research.
http://www.journaloftheoretics.com/Editorials/Vol-1/e1-4.htm
@ Jane Shaw
http://www.cancer.gov/cancertopics/factsheet/tobacco/cancer
Yes, thank you GEF05, that’s exactly the kind of hysterical disinformation I was talking about.
@Jane
Bait. Bite? Reel. Oh, slipped off.
/better luck next time