A simple semester in an economics class at any community college would yield tremendous results for lawmakers. If each and every lawmaker were able to grasp a relatively-simple economic concept, much of America’s fiscal disasters could be avoided.
This concept is: economic policies have consequences.
Sure, it sounds simple enough, but too-many liberal lawmakers appear unable to grasp this concept. Take Obamacare, as an example. By forcing the young and healthy to purchase high-premium plans to offset the costs of the infirm, fewer people will purchase healthcare insurance. If fewer people purchase healthcare insurance, healthcare insurance providers will be driven-out of the marketplace. If there are less options, prices will increase and even fewer people will purchase healthcare insurance and the cyclical problem only worsens until the market collapses.
See what I’m saying about consequences? Policymaking demands that lawmakers consider the long-term consequences of their decisions and, sadly, in today’s world, formulating a policy that sounds nice is more important than creating sustainable economic policies conducive to commonsense.
What would happen if, in an effort to victimize smokers, a state significantly raised taxes on cigarettes? We no longer have to wonder; New York did exactly that and it cost them $400 million.
Cigarettes in New York are pricey; average prices for a pack hover around $10.60 and this is by design. In 2010, New York raised the taxes on each pack from $2.75 to $4.35- a huge leap. Since 2006, taxes on cigarettes in the Empire State have risen 196%.
According to state officials, New York lost out on $400 million because of the move.
The New York Post reports on a study by the National Academies of Sciences, Engineering, and Medicine which shows that the state loses $1.3 billion each year as New Yorkers switch to cheaper smoking alternatives. While some switch to smokeless tobacco, many have avoided the outrageously-high price by buying on the black market, buying from Indian outlets and buying out-of-state.
The Daily Caller reports on the windfall of cash that is funding organized crime because of the state’s inability to understand consequences of economic policies:
The last 10 years have a been a boon to organized crime, with 58 percent of New York’s cigarettes supplied from out-of-state,according to the Tax Foundation. The number of packs bought paying the full tax has also collapsed by 62 percent.
But it’s not only New York that’s losing out from the high rate of smuggling. The Bureau of Alcohol, Tobacco, Firearms and Explosives estimates states lose $5.5 billion in revenue thanks to cigarette smuggling.
The illegal tobacco trade has a global reach with The Framework Convention Alliance (FCA), a coalition of anti-smoking groups organized by the World Health Organization to promote tobacco control globally, estimating that, “illicit trade in cigarettes represents approximately 10.7 percent of global sales, or 600 billion cigarettes annually,” and reduces government revenues by between $40 billion and $50 billion per year.
High cigarette taxes not only assist global crime networks but also have a disproportionate impact on the poor. According to the New York State Department of Health, low-income smokers, defined as individuals in households earning less than $30,000 a year, spent 23.6 percent of the annual household income on cigarettes in 2010-2011. That number is up from 11.6 percent in 2003-2004.
Talk to any New York lawmaker and they will likely offer a canned comment claiming that their nanny-statism is saving lives, but in reality, smokers aren’t forgoing their deadly habit; they’re either switching to other lethal tobacco products, enriching neighboring states or, most disturbingly, lining the pockets of criminals at the expense of state coffers.
But hey, it sure sounds nice, right? And isn’t that really the point of modern liberal policies?…