The Many Sides of the Tobacco Debate

Edward J. Dodson

[A Land-Theory discussion, October 2000]

ED DODSON (4 Oct 2000)

Monday's edition of the Wall Street Journal included a report by Gordon Fairclough with the revealing title, "Governments Can Be Addicted to Cigarettes." I have always thought it the height of hypocrisy that while spending Billions of dollars to treat lung cancer and heart disease Patients who have destroyed their organs by years of Cigarette smoking (and millions in public education Campaigns warning of the dangers of smoking) that Legislators in tobacco growing states have been able to Retain long-standing subsidies for these farmers. And then There is the assistance provided to the tobacco companies by The U.S. Department of Commerce to sell their cancer -- causing Products in foreign countries. Astoundingly, things (from my perspective) seem to be getting worse rather than better.

Fairclough reports that the World Health Organization Forecasts that by 2030 cigarettes will be the leading cause Of premature death around the globe. Apparently, a large Number of governments around the world are Keynesian; they know that in the long run we are all dead; in the short run, there is big money to be had by either taxing cigarettes or manufacturing them directly.

First, there's the European Union. More than 70% of the Average retail price goes to governments. In Brazil, it is 65%. Roughly 6% of all revenue taken in by Germany came from taxes on cigarettes. China is the world's largest cigarette manufacturer and gets 13% of its total revenue from tobacco sales and taxes. In Japan, the government owns two-thirds of the country's largest cigarette maker.

What would more taxes do? I have always thought that heavy Taxes would simply cause the market to go underground. Smugglers would be the primary beneficiaries.

So, what do you all think ought to be done, if anything?


BILL BATT (4 Oct 2000)

Bill here; I may have more thoughts on yours in a bit. But Let me first reply by inserting this column of Daniel Schorr printed in the Christian Science Monitor On September 22:

Exporting Marlboro Man By Daniel Schorr

(WASHINGTON)In Chicago last month, 4,500 public-health specialists held a World Conference on Tobacco and Health, sharing the latest knowledge on Cigarettes and disease. They cited global statistics Indicating that tobacco kills someone every 8 seconds, Amounting to 4 million deaths a year - 70 percent of Them in the developing world - and expected to rise to 10 million in the next 30 years.

In Geneva next month, the 191 members of the World Health Organization will begin the long process of Negotiating a framework convention on tobacco control. If this survives the concentrated attack of the Tobacco industry, it would be the first legally Binding treaty devoted to health. In Boston last week, The University of Massachusetts released a study Showing that 12- and 13-year-olds can become addicted Within days of lighting their first cigarettes.

And yet, in the US House of Representatives last week, an administration-endorsed bill was passed by an overwhelming 315 to 109, providing $4billion to $6 billion in tax-beak subsidies for export of products like airplanes and cigarettes.

An amendment rule protected the cigarette subsidy From the few, like Henry Waxman(D)of California, who Asked why America was engaged in the "export of death and disease. "Lloyd Doggett(D)of Texas said President Clinton had told him he favored removing Tobacco from the export subsidy list, but the Administration did nothing to make that happen.

You understand, of course, why cigarette exports are So important to American companies. The campaign Against smoking in many states has reduced the American market and today more American cigarettes are Smoked abroad than at home.

Cigarette exports have tripled in recent years. The Marlboro Man is a live and well in many developing Countries that lack the legal resources to protect Their populations. President Clinton has shrugged off The idea of international regulation.

And now, thanks to the House bill, which is expected To pass the Senate without trouble, American companies Will enjoy about $100 million in tax breaks to help Them peddle cigarettes around the world. Which will Ensure that America, the leading exporter of arms, Also remains the leading exporter of tobacco-related illnesses.

Bill again:

The thing to recognize here is that there are many Kinds of taxes, and increasingly the word tax has Become a term of art. Some students of public finance Limit the use of the word tax to mean an involuntary Payment to support the general services of government (i.e. not earmarked) according to the ability to pay. It is often used to distinguish it from the benefit Theory which more often is applied to user fees. Then There are lottery payments, traffic fines, green fees, None of which in this strictest sense are "taxes" to Some writers.

In the case of taxes on cigarettes, they could either Be interpreted as Pigouvian taxes(or more often charges),employed to incorporate external costs, or sometimes what is called a "sumptuary tax," or "sin tax." To what extent Georgists would eliminate all such revenues in favor of the collection of rent is, I believe, an open question. I for one would favor keeping some of those other revenue sources. And using tobacco as a base on which to levy a Pigouvian charge or asumptuary tax is not to me inconsistent with the collection of rent.

TONY O'BRIEN (5 Oct 2000)

Bill, in response to Ed's item on the highly unethical way in which Governments both promote, receive revenue from and punish the use of tobacco, wrote:

The thing to recognize here is that there are many Kinds of taxes, and increasingly the word tax has Become a term of art. Some students of public finance Limit the use of the word tax to mean an involuntary Payment to support the general services of government (i.e. not earmarked) according to the ability to pay. It is often used to distinguish it from the benefit Theory which more often is applied to user fees. Then There are lottery payments, traffic fines, green fees, None of which in this strictest sense are "taxes" to Some writers.

In the case of taxes on cigarettes, they could either Be interpreted as Pigouvian taxes (or more often charges), employed to incorporate external costs, or sometimes what is called a "sumptuary tax," or "sin tax. "To what extent Georgists would eliminate all such revenues in favor of the collection of rent is, I believe, an open question. If or one would favor keeping some of those other revenue sources. And using tobacco as a base on which to levy a Pigouvian charge or asumptuary tax is not to me inconsistent with the collection of rent.

Many Georgists both profane and eminent would agree with Bill's point Of view. I am a bit uneasy about accepting any tax as such, since it Puts a serious dent in the contention that the collection of Rent will More than adequately provide for all government requirements. Many of The supporters of the retention of 'sin taxes' and 'green's taxes Seem to reckon that such punishment will eventually eradicate the Things taxed. If that were so, then no one would smoke anymore, since Most smokers have gotten used to being punished by taxation ever since The first commercial cigarettes were produced. Some even argue that, given the general improvement in disposable incomes and the abolition of taxes in a site rent system; unless punitive taxes on these potentially harmful products was retained and even increased, alcohol and other substance abuse would increase.

I would argue the reverse; that such abuse, given the improvement in The social and work environment and the diminution of 'dog eat dog' Pressure to earn a dollar, would drop dramatically, if not disappear altogether.

Even Ronald Banks, in his otherwise admirable and reasoned chapter in "Losses of Nations", suggested that "health and ecology" taxes on tobacco, alcohol and petrol, plus import duties on cars to cover their 'social health costs!'[emphasis added] should be retained". Am I alone in detecting an element of Puritanism in these views?

Who can say definitely whether this would or would not continue or increase. All I'd be prepared to conjecture is that their increased use and abuse would be highly unlikely. In a Geoist society many existing social and economic maladies such as involuntary poverty and unemployment, degrading social conditions, stressful work environments, financial insecurity etc, will be if not eradicated, then all but. It is these conditions which push many to take to alcohol abuse and to excessive use of tobacco as a means of escape or stress relief from what often seems like a bleak spiral of defeat and despair. I would suggest that removing all taxes from these products, and simply taking a site rent from the manufacturers and retail outlets, as with all other enterprises, will be all that need be done. People will still use these products, and no doubt some will abuse them, but I would contend that the instances of abuse and the physical and social damage caused will practically disappear, and that the cost of treating victims will either be borne by the victims themselves under their own (by then easily affordable) medical insurance, or by a state emergency medical system, the cost of which will be relatively small and will be begrudged by no one in the by then prosperous, egalitarian society of Geotopia.


DAVID HILLARY (5 Oct 2000)

Taxes on tobacco, gaming and alcohol are regressive extreme tax rates Seem to becounter-productive resulting in less revenue for the government.

The external costs of these things are probably quite small, the main Costs are to the person who uses them and their household. The exception Occurs where the government picks up the pieces of personal/household strife. I see the solution to reduce taxation to substantially lower levels reflecting only the external costs of the products or activities on society generally, and eliminate government as a personal financial and health saviour of the masses. I suspect a rational capitalist ethos can be generated from the reality of risk and costs in personal behaviour, and the need for personal restraint. In this ethos, use of these substances may fall somewhat.


HARRY POLLARD (5 Oct 2000)

Tony,

As I've said before, one must be truly dedicated when one is faced with Fosters.

There is a tendency among us - and certainly among many other groups -- to Advocate taxation to induce 'good behavior'. Punish 'em for doing bad -- Reward them for doing good.

In a free society, people must be allowed to go to hell in their own fashion. It's not the business of the State. On the other hand, I have no objection to charging people for what they get, or for what they do to others.

That's why I collect Rent and don't tax land-values. That's why I would Charge a polluter for the harm he is doing - but wouldn't tax him.

Ron's well off base with the import tax on cars. As we have discussed, the Economic efficiency that accompanies the geocracy would lead to compact Cities and probably the end of most roads within urban areas. Supplies Would perhaps arrive via underground tunnels, which would lend themselves To assemblyline delivery, rather than the trundling of hundreds of trucks And such like.

An import tax on cars seems to me to be part of "whimsical tax theory". Let's tax that! No, let's tax this, then tax that later.

We are against taxes - all of' em. Perhaps the most significant attribute Of a tax is that its collection has little or nothing to do with the Benefits it is intended to provide the payer.

Incidentally, with regard to smog, Georgist Margil Wadley was Chief Chemist At the Air Quality Management District in Los Angeles. (It was the Air Pollution Control District, but changing names has a magical quality to the bureaucracy.)

He did a paper showing that air quality within the cars was a lot worse Than outside on the freeway. So, maybe the "import tax" should be used to Reduce automobile internal pollution. Perhaps, special agents should stop cars, spot check their interior pollution, impound all cars that did not meet the official standard.

Well, I'm kidding. But, we have too much of this kind of thing going on in The land of the free, and I'm sure Down Under you are well under their thumbs.

So, replace taxes with charges - including charging for the "external Community created values that attach to locations".


CHRIS TOTO (5 Oct 2000)

Tony,

Experimentation is a natural, active and individualistic oriented form of learning. Nothing wrong with that as long as no permanent damage is done. Self-generated learning is better than martially rote driven training. Far More permanent damage is associated with authoritarian restrictions into Mandatory passive learning modes.

I agree that selfabuse, addictions and over indulgences are symptoms of "pressure relief valve" behaviours.

It is most important that these behaviours NOT be outright outlawed, because That excludes any chance of civil justice from mediating between Participants in contraband markets.

There is a "knowledge problem" with the "externalities" of selfabuse. It is Unclear that selfabuse would really present a social burden in a Geoist society. Even now, the cries against smokers and alcoholics pale against aggregate analysis. Alternative commentary suggests that most smokers and alcoholics don't live long enough to present oversized costs to society.

One problem with taxing selfdestructive behaviour is that it scapegoats These people. These people already have enough problems with self Victimization and persecutions. Do we really want to make their burden heavier? Will giving them heavier loads help them trudge faster along the path of selfdiscovered health, selfaffirming recovery? I don't think so, I think external burdens will delay the healing journey.

My limited experience and study of the addiction issue is that the *stick* approach* externally* applied almost never helps. The only lasting process of selfreform is the *carrot* approach *internally* activated and self generated. Individuals must feel drawn to a positive selfinspired goal; external tollgating or external punishments never convince a person's internal reality. Mike Gray's book "DrugCrazy" has a few interesting stories of how several drug addicts in the Uks more liberal, physician oriented healthcare system gradually weaned themselves back into normal lives because they had positive goals, not external punishment. The only things society can do is to hold these people's hands and encourage them to act in their objective selfinterest while providing a social context of justice and nurturing, not condemnations and punishments.

Another problem is that once we cross the line into advancing various types Of lifestyle punishment controls, where do we stop? Some of my relatives Like putting ugly plastic pink flamingoes on their lawns. Should we tax Plastic pink flamingoes?

The third problem with taxing of personal vices reminds me of some arguments I've encountered with neo-libertarians and conservatives. They always like to Bring up the "bum and wino" rapp, the decrepit moral defectives scapegoat argument. They dredge this up when I support every, I mean *every* person's equal rights to land and land values including an equal share of a land CD.I say "yes" because even bums have a right to live, and we have no right to help bums in selfdestruction. It may be his only form of selfactuating freedom, selfcontrol in his own judgement.

Everyone has equal rights not only to Land, but also to his own Wage, his own Fruits of Labor. That's why I wouldn't go out of my way to support the Introduction or extension of vice taxes. We might tolerate vice taxes in some Sort of transitionary progression from the present mire into Geotopia but I Would oppose retaining them on theoretic grounds.

Besides, tobacco and whiskey have been popular, localist commodity money Alternatives to corrupt privilege rending monetary monopolists. Cannabis, opium, and coca could easily perform similar roles.


TODD ALTMAN (5 Oct 2000)


ChrisToto writes:

One problem with taxing self destructive behaviour is that it scape goats these people.

Another problem is that it violates the most fundamental property right of all -- the property that each individual has in his own person. Yet another problem is that the current *war* against marijuana users (see www.norml.org for details) *began* with the Marijuana *Tax* Act 1937.

"The function of government is to protect me from others. It's up to me, thank you, to protect me from me." -- Peter McWilliams

"It is not the business of government to make men virtuous or religious, or to preserve the fool from the consequences of his own folly. Government should be repressive no further than is necessary to secure liberty by protecting the equal rights of each from aggression on the part of others, and the moment governmental prohibitions extend beyond this line they are in danger of defeating the very ends they are intended to serve." -- Henry George

"Vices are those acts by which a man harms himself or his property. Crimes are those acts by which one man harms the person or property of another. The object aimed at in the punishment of crimes is to secure, to each and every man alike, the fullest liberty he possibly can have--consistently with the equal rights of others--to pursue his own happiness, under the guidance of his own judgment, and by the use of his own property. On the other hand, the object aimed at in the punishment of vices, is to deprive every man of his natural right and liberty to pursue his own happiness, under the guidance of his own judgment, and by the use of his own property." -- Lysander Spooner

"Drugs are a tragedy for addicts. But criminalizing their use converts that tragedy into a disaster for society, for users and non-users alike. Our experience with the prohibition of drugs is a replay of our experience with the prohibition of alcoholic beverages." -- Milton Friedman

BILL BATT (5 Oct 2000)

ChrisToto wrote:

My limited experience and study of the addiction issue is that the *stick* approach *externally* applied almost never helps. The only lasting process of self reform is the *carrot* approach *internally* activated and self generated. Individuals must feel drawn to a positive self inspired goal; external toll gating or external punishments never convince a person's internal reality.

Bill here: I think this thought is central to our argument for the collection of economic rent. Among the principles typically listed of a sound tax design is neutrality. I'm not talking about revenue neutrality, of course, but rather the absence of economic distortion. In several respects our current tax system is a plethora of carrots and sticks. Hence we get all kinds of economic inefficiencies and excess burdens.

One, for example, is sprawl development. Simply removing the distortion imposed by current taxes and collecting rent instead creates tax neutrality. It is neither a carrot nor a stick. In a sense the argument is a perfect defense of free markets. In many presentations I have made to audiences, I start by enumerating the "basic tax principles"; once these are accepted, we're half way home! (The other tax principles typically listed in economics texts are simplicity, efficiency, administrability, equity, sufficiency, stability, and certainty, not always listed in quite this order or using these words.)

The problem with current conventional tax design is it is a collection of carrots and sticks!


ED DODSON (5 Oct 2000)

Chris Toto wrote:

One problem with taxing self destructive behaviour is that it scape goats these people.

Todd Altman responded:

Another problem is that it violates the most fundamental property right of all -- the property that each individual has in his own person. Yet another problem is that the current *war* against marijuana users (see www.norml.org for details) *began* with the Marijuana *Tax* Act 1937.

Ed here:

There has been little moral indignation expressed over governments sanctioning criminal license or committing criminal license in the pursuit of revenue. If we agree that when we live together as a society we have some moral obligation (either active, to help; or, passive, do no harm) toward one another, then one's decision to inject oneself with poisons on a daily basis requires some societal response. If our charge is to help, then we ought to do our best to educate people regarding the dangers and to provide remedial care. If our charge is do no harm, we certainly cannot subsidize tobacco farming or the manufacture or export of products that are known carcinogens and poisons.

Another (in my mind) complication is the relationship of the smoker to others. This analogy also applies to other types of behavior that lead to voluntary incompetence. When one knowingly engages in behavior that will cause disease and reduce our ability to be productive, *and* one is the parent of children (as the clearest case of responsibility for the well-being of others), what ought to be the societal response?


TONY O'BRIEN (6 Oct 2000)

Ed wrote:

Another (in my mind) complication is the relationship of the smoker to others. This analogy also applies to other types of behavior that lead to voluntary incompetence. When one knowingly engages in behavior that will cause disease and reduce our ability to be productive, *and* one is the parent of children (as the clearest case of responsibility for the well-being of others), what ought to be the societal response?

I believe firstly, that in a society with a site rent revenue system, such self harming behaviours will have diminished to insignificance.

Secondly, in relation to the child or dependants of a long time abuser no longer competent to honour his or her fundamental duties of care is to defend the victim by removing him or her from such a situation and attempting to place them in a situation where they will receive the love and care which is the right of every child.


JEFF SMITH (6 Oct 2000)

On Wed, 4 Oct 2000 19:03:56 -0700 (PDT) Bill Batt writes:

- In the case of taxes on cigarettes, they could either be interpreted as Pigouvian taxes (or more often charges), employed to incorporate external costs, or sometimes what is called a "sumptuary tax," or "sin tax." To what extent Georgists would eliminate all such revenues in favor of the collection of rent is, I believe, an open question. I for one would favor keeping some of those other revenue sources. And using tobacco as a base on which to levy a Pigouvian charge or a sumptuary tax is not to me inconsistent with the collection of rent.

If the levies go to the general fund or go to treating smokers?

Plus, sin taxes have to be kept low enough to avoid driving sin underground.


JEFF SMITH (6 October 2000)

On Thu, 5 Oct 2000 20:28:46 -0400 "Edward Dodson" writes:

When one knowingly engages in behavior that will cause disease and reduce our ability to be productive, *and* one is the parent of children (as the clearest case of responsibility for the well-being of others), what ought to be the societal response?

Man, you are good, Ed. Society does have power. To not use its power might also be a form of abuse, almost as much as using power too much or where inappropriate.