Convoluted Logic, Sin Tax, and Small Business

cigar1It’s a balmy 70 degrees here in America’s Heartland today so I decided to move things outside. I also decided to treat myself to a Starbucks coffee and a good cigar. Does life get any better?

Let me say at the outset that I’m not what you’d call an avid smoker. The fact that I’m enjoying my first cigar of 2009 on March 5th is a pretty good indication of that. But I do enjoy treating myself to a good stogy once-in-a-while. My lovely wife informed me long ago that cigars are a pleasure best enjoyed outdoors (and I don’t disagree) so warm weather inspires me to light up.

Visiting my neighborhood retailer,(a local merchant, of course) I noticed a number of signs warning smokers that, as part of the “stimulus package” a huge tobacco tax increase is going into effect on April 1. “Best stock up now” the signs said, while prices are “low”. I haven’t thought prices were low in a long, long time, but I suppose it’s all relative.

This is not a rant about politics, or about smoking, but rather about common sense, or the lack thereof. There’s nothing new about a “sin tax”. Lawmakers have been using them for eons on the theory that the majority of people will support a tax that doesn’t hit them directly. Tobacco, alcohol, gas-guzzling cars, and other non-necessities are fair game in tough economic times.

But here’s where the common sense part comes in. This new levy is said to serve two purposes. First, the additional revenue is supposed to be used to fund health-care programs. Second, the prohibitive cost of a carton of Camels, or a box of Macanudos is supposed to discourage smoking.

Now, I’m no economist, but it seems to me that there’s something wrong with the logic here. If smokers suddenly switch to chewing gum, doesn’t that mean that there won’t be any money for objective number one? Won’t they have to put an excise tax on Juicy Fruit?

This reminds me of the business owner who says that business stinks so he’s going to cut back on his advertising. A + B (or A – B) may equal C, but life is rarely that simple. The world is full of Ds, Es, and Fs that all have an impact on the equation.

Let’s not throw the baby out with the bath water. Government may be a lot of things, but it’s rarely a good example of how to run a business.

Now, if you’ll excuse me, I have to finish my cigar while I can still afford it.

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