Smoke Screen Arguments
Yesterday, Martha King made a liberty-oriented argument against cigarette taxation, noting that cigarette taxes are imposed by a majority (nonsmokers) on a minority (smokers). A study in The Public Opinion Quarterly supports her conclusion; it found that where cigarette taxation is involved, individuals are self-interested. Nonsmokers favored cigarette taxes far more than smokers did. The majority choose to impose a tax on the minority, in many cases using moral or economic arguments that the use of cigarettes leads to poor outcomes.
The Daily RFT blog picked up on her post, but didn’t seemed particularly swayed by an argument for liberty. I had a conversation yesterday morning with my coworker Abhi Sivasailam, who suggested an efficiency argument against taxation, and pointed me to a National Bureau of Economic Research working paper titled “Cigarette Taxation and the Social Consequences of Smoking.” An argument that many people make in their attempts to justify cigarette taxes is that such a tax helps to internalize the additional costs of smokers — but this study concludes that the societal cost is already internalized.
From the study’s abstract:
Detailed calculations of the financial externalities of smoking indicate that the financial savings from premature mortality in terms of lower nursing home costs and retirement pensions exceed the higher medical care and life insurance costs generated. The costs of environmental tobacco smoke are highly uncertain, but of potentially substantial magnitude. Even with recognition of these costs, current cigarette taxes exceed the magnitude of the estimated net externalities.
So, if the costs of smoking are already largely internalized, imposing additional taxes on cigarettes is inefficient. It’s also worth pointing out that cigarette taxes are regressive, and any argument that holds the state should appropriate money from smokers to pay for other programs places an undue burden on a vulnerable group.
Is it horrible that people die from smoking cigarettes? Yes. Is it horrible that people die in automobile accidents? Yes, but that doesn’t constitute a rationale for taxing cars out of existence, or cupcakes, or the many other things that people use and enjoy that can also contribute to future poor health. If free, consenting adults choose to smoke, despite the known risks, it is their prerogative.
Ummm….externalities? second/third hand smoke, healthcare costs, pollution externalities?
Comment by Eapen Thampy — June 15, 2010 @ 8:37 p.m.
Funny, I could’ve sworn this post was in large part specifically about how the perceived externalities of smoking are probably overestimated…
Regardless, the existence of externalities is not sufficient justification for government intervention as a corrective.
Comment by Eric D. Dixon — June 15, 2010 @ 9:00 p.m.
Eapen, the only alleged externality that you have pointed out which is not covered in the article is secondhand smoke.
Costs from exposure to secondhand smoke are not imposed on third parties, though. If individuals put themselves in an environment where they are exposed to secondhand smoke, they have (de facto) agreed to bear the potential costs of that exposure.
Comment by Josh Schisler — June 15, 2010 @ 10:04 p.m.
I do believe I’d already addressed the arguments you brought up in your comment within the body of this post (please re-read it if you didn’t notice my discussion of externalities), but I’m all for strengthening my arguments as much as possible. Here are a few articles that didn’t make the post that support the above statements:
A study from the New England Journal of Medicine suggested that there would be a net increase in health care costs if smokers quit smoking.
A study supported by the Department of Health and Human Services that was (assuredly) intended to prove otherwise, said: “On balance, smokers probably pay their way at the current level of excise taxes on cigarettes…”
The danger of second and third hand smoke may be over-hyped: Reason magazine.
Comment by Caitlin Hartsell — June 15, 2010 @ 10:31 p.m.
I should have been more clear. I don’t think that this article gives a coherent analysis of an entire class of externalities, and I’m not sure why you’d use analysis from 16 years ago to make that case. If you actually read the article I think this is clear.
Comment by Eapen Thampy — June 17, 2010 @ 12:24 p.m.
@Eapen- Nam ethe externalities you feel are missing?
Comment by S/A — June 25, 2010 @ 1:34 a.m.
Taxing a minority should be illegal, if it isn’t already. There is absolutely no reason the government should have the right to tax minorities.
Comment by jz — May 30, 2011 @ 10:18 p.m.