Sunday, December 7, 2008

Herald Leader's chicken/egg problem

Found one very odd sentence in a Lexington Herald Leader editorial urging a cigarette tax increase this weekend:

"Kentucky's cheap cigarettes fuel an interstate black market."

This is demonstrably false.

There is a vigorous interstate black market in cigarettes. People buy cigarettes in low-tax states and take them to high-tax states for illegal resale at a healthy profit.

Cigarettes in New York City are taxed $4.25 a pack. In Kentucky, it's thirty cents. Do the math.

So, who is causing the problem? Think about this: if Kentucky and all other states raised their cigarette tax to $4.25, would the cigarette black market wither away or would it get a huge boost with the crime merely becoming more widespread?

On the other hand, let's say every state eliminated cigarette taxes. What do you think would happen to the "black market?"

People buy cigarettes legally in low-tax states to sell illegally in high-tax states. How, exactly, is that the fault of the low-tax states?

The tax increase advocates are really getting desperate. They would expend far less energy torturing logic if they just admitted that we have overspent ourselves into a mess.

Smaller government is the better answer.


Hempy said...

Smaller government is not the answer. That just breeds inefficiency. Our founders advocated good government. Thomas Jefferson wrote:

"The care of human life and happiness and not their destruction is the first and only legitimate object of good government."

If you're so concerned about wasteful government spending, why have you been as mute as a doorknob on the squandering of $270 million annually to incarcerate non-violent marijuana users for the benefit of the private prison industry?

Your hypocrisy reeks to the highest heavens!

Your hypocrisy reeks even more when it comes to proportional taxation. Fair taxation is anathema to conservatives and Republicans alike. Yet proportional taxation is an American value expressed by Alexander Hamilton in Federalist Paper 12. He wrote:

"The ability of a country to pay taxes must always be proportioned, in a great degree, to the quantity of money in circulation, and to the celerity with which it circulates. Commerce, contributing to both these objects, must of necessity render the payment of taxes easier, and facilitate the requisite supplies to the treasury."

Why not a proportional tax on the sale of cigarettes?

Anonymous said...

Hi Hempy, you never did answer me from a few weeks ago.

I believe Hamilton is saying the ease or ability of a country to pay taxes is proportional to the amount of money changing hands.

He does not say anything about how that country should pay taxes, just that if money circulation goes up, ability to pay taxes goes up.

Anonymous said...

And I would have no problem with proportional taxes on cigarettes or alcohol or gasoline. How about a 6% rate?

Why should sellers of a legal product have to pay higher taxes than someone who sells another type of widget?