Big Bone Lick

Kentucky, the state that made me get an egg license, is in the news again because it is complaining that it is not getting its fair share of the tobacco settlement funds, and so needs to increase cigarette taxes even more. 

Don't feel guilty if you can't actually remember what the settlement was about other than just more tax money.  The settlement was the result of a series of lawsuits from state AG's against cigarette companies arguing that use of their product is costing the states money in the form of higher medical costs (the health care as Trojan horse for total government control argument I have discussed before).  The substantially increased taxes on cigarettes was supposed to both deter use and to raise money for state health care.

Well, check out this statement form the Kentucky governor as to why he wants to raise the cigarette taxes, and notice what justifications for the taxes are NOT there:

The additional revenue from the tobacco settlement,
according to [governor] Fletcher, would increase the state's debt capacity and
allow for more spending on more projects, such as an information
technology research center and expanding the Big Bone Lick State Park.
He also says the added revenue would allow the state "to ease the tax
burden on small businesses."

I do have to admit that "Big Bone Lick" state park seems the perfect monument to government taxation.

This is a great example of the perverse incentives "sin" taxes put on government.  First put in place to reduce some behavior, once government officials become addicted to the spending the tax allows, the government tends to shift posture to supporting, rather than reducing, the "sin" since its continued existence is required to maintain tax revenues.  This is happening all over with the tobacco settlement, as government has suddenly become the tobacco companies' partner in maintaining revenues and market share.  And here I wrote about a similar occurrence.

Postscript:  By the way, not accounted for by the governor in his "fair share" of settlement funds are the large subsidies that flow to Kentucky tobacco growers.  In surely one of the best examples of how most government programs are all about rent-seeking rather than whatever their stated purpose is, the US is vigorously taxing tobacco, ostensibly to reduce its use, while at the same time aggressively subsidizing the production of tobacco.

  • More vile than the Stamp Act and that was enacted by a bunch of power hungy, lazy Aristocrats, a mentally disturbed King, and a bought-off, lame, and gutless House of Commons.

  • Permalink,

    I enjoyed reading your post on tobacco taxes, but isn't the biggest subsidy to tobacco growers in the form of acreage restrictions? To grow tobacco for sale, one must have an acreage allotment. This keeps the production of tobacco down and, of course, prices up. This doesn't seem at all incompatible with reducing consumption. Direct subsidies, of course would be, but so much of our farm programs, including tobacco, is about supply restraint. It really is first-class rent seeking.

  • I've previously argued from a similar position regarding the Michigan tax on smokes, which I believe is now second or third highest in the country. We pay about $5.50 for a box of Marlboros.

    Among other things, Michigan uses the tax to support the schools. I like your "Trojan Horse" comment, and I'll have to read your previous posting, it's ceratinly a concept that my argument was approaching, but never quite materialize. In short, I've debated the merits of "externality arguments" ad nauseum, and I've suggested that the State is becoming dependent on the tax revenue - that if the tax actually did what it was supposed to do (i.e. demand for cigarettes was elastic) then they'd actually suffer a decreased revenue and lack of funding for the projects that the taxes currently fund.

  • markm

    doinkicarus: It's a closed-loop positive feedback mechanism. The government taxes smokers to pay for the schools. The government-run schools are very, very poor at education, and stiflingly conformist (in a PC/feminist way). Rebellious and ignorant kids grow up to do stupid things, like smoking...