Cigarette Sales Dive After Tax Hike, But Why?
by Bob Walsh
Yes, this was the headline of an item in the Sacramento BEE a couple of days back. The state increased the sales tax on a pack of coffin nails by an additional $2 per pack. Tax revenue from tobacco sales dropped 64%. The stupid bastards that run our state are too dumb to figure out the difference between static and dynamic modeling.
If you increase the tax by 1% you will probably get only a modest decrease in the taxed activity. If you increase the tax by 100%, especially if it is already considerable, you will almost certainly get a HUGE drop off of the taxed activity. Maybe people are buying their cancer sticks at Native American reservations. Maybe they are buying bootleg out-of-state cigarettes. Maybe they are getting really down and dirty and rolling their own.
The mere fact that our government is stupid enough to ask a question like this should convince the taxpayers that our political ruling class is made up mostly of morons. It won't, but it should.
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