Friday 3 September 2010

Getting the sign right

As I've noted more than a few times, tobacco excise revenues tend to more than compensate governments for whatever health costs smoking might impose on governments.

New Zealand's anti-tobacco zealots at MoH seem pretty determined to use whatever dodgy method will get them the contrary result: counting all the excess costs imposed by smokers against a counterfactual that smokers would never otherwise have had any end-of-life costs. The response I've gotten from MoH boffins is that MoH doesn't keep stats on what dead people would otherwise have cost the system. Seriously. Never mind that anti-tobacco folks seem more than happy to produce estimates of what dead people would earned so that their lost tax revenues can be counted as a cost of smoking. Rest assured that I'll be pursuing alternative channels on this one. I view MoH's continued use of the $1.9 billion cost figure as tantamount to fraud; they, of course, disagree.

But who does get the sign right on the fiscal externality? Russia. Here's the Russian finance minister:
Speaking as the Russian government announces plan to raise duty on alcohol and cigarettes, Alexei Kudrin said that by smoking a pack, “you are giving more to help solve social problems such as boosting demographics, developing other social services and upholding birth rates”.

“People should understand: Those who drink, those who smoke are doing more to help the state,” he told the Interfax news agency.
Boosting demographics means "dying earlier so there are fewer pensioners relative to young people"; developing other social services means "you're paying way more in tax than you're costing us, so we can use the difference to fund other things"; "upholding birth rates" presumably means that smoking and drinking are complements to procreational activities.

I love Russian candor.

HT: Snowdon


  1. So the opposite argument also supports a tax increase? I suppose the only common thing between the two points of view is that it's a public official making the argument, which is about all the explanation necessary.

  2. So that's the reason my love life went down when the cigarette tax excise went up... :)

    Its refreshing to hear politicians not making the sounds bite they expect the median population to want to hear.

  3. @Matt: If all you care about is tax revenue maximization and you're less worried about efficiency considerations given big problems in your income tax system, then ramping up taxes on inelastic goods isn't crazy to that end.

    The jawboning is to encourage people not to reduce consumption with the tax increase.

    @James: The median Russian population is different than the median here. I also love Russian politicians on global warming, who rightly conclude (from a them-utilitarian perspective) that it ought to happen faster - screw the world, Russia's better off.

  4. I recall posting a couple of years back about some Dutch research that found smokers and morbidly obese people imposed significantly fewer costs on the Dutch health system over their lifetimes than "healthy" people, because they tend to die relatively young of things that kill them relatively quickly. We skinny non-smokers tend to hang around for decades of expensive deterioration in old age, long after the smokers and fatties are dead. So your pursuit of MoH to put a figure on lower end-of-life healthcare costs for smokers due to them being dead already is well worth it. This really should be taken into account if they're going to blather on about how much smoking "costs" the health system.

  5. MoH isn't going to do it absent pressure from beyond me.

    First, it comes under Turia's portfolio, not Ryall's. Ryall doesn't put up with bullshit and, were this on his watch, I think things would be pretty different. But, as it stands, the serious folks don't need to get involved 'cause it's covered by an SEP field.

    Second, the boffins are retrenching rather than fixing - fixing it would mean admitting that they misled Cabinet about the need for the tax increase. Think that's going to happen?

    Oh, Psycho: you caught that Adolf called me a socialist? I like that.

  6. Shoot first and ask questions later, that's our motto. I'm not like Adolf, though - when commenters turn up on my posts brandishing facts and figures that contradict what I'm saying, I usually choose "libertarian" for the pejorative...

  7. I do like that, henceforth, when somebody calls me a crazy libertarian, I can always reply that I've also been called a socialist troll.

  8. could you please provide a link to you being called a socialist... I find that hilarious