Wednesday, May 20, 2009

"It Won't Work"--the Cigarette Tax Mirage

Aside from the cigarette tax being very poor public policy, regressive by its nature, and being a declining revenue source, the damn things DO NOT WORK.

Here's the 'need-to-know' line from a study commissioned by retailers:

A 2007 study by the American Shareholders Association found the average state cigarette
tax rate has more than doubled in the past seven years, from 42 cents to 92 cents a pack. Tobacco tax collections increased only 59 percent over that period
(P. 8)

In other words, the Law of Diminishing Returns is at play; cig-tax increases are only ~49.6% efficacious.

Of course, that also means that when Jim Doyle & Co. promise $Umpty-Millions in 'new revenues' based on their cig-tax increase, you can count on a general tax increase to make up for the deficiency in cig-tax revenues.

Or, I suppose, the State could actually cut spending.

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