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"...public opinion deserves to be respected as well as despised" G.W.F. Hegel, 'Philosophy of Right'

squeezing Big Tobacco « Previous | |Next »
April 29, 2010

If the Rudd hospital reforms increasingly look as if they will make minimal difference to the way that public hospitals are run, then the shift to preventing smoking by ensuring that cigarettes would be sold in plain packs is to be welcomed.

This represents a reduction in cigarette advertising (brand names and product names will have to be displayed in standard colour, font style and position) and it will, according to leaks, be accompanied by a hike (25%) in the tobacco tax in the budget.


This public health policy is welcomed because it is a good public health measure: smoking kills people and the harm that it causes for smokers and non-smokers costs the nation around $31 billion.

The standard utilitarian argument is that if social costs are greater than social benefits then that activity should be taxed. Increased taxes act as a price signal to consumers to change their smoking habits. So Big Tobacco should pay some of the cost of smoking on the public health system.

Big Tobacco is outraged---the plain packaging legislation constitutes an expropriation of intellectual property rights (their trademarks). They are demanding billions of dollars to compensate for the loss of their trademarks. The argument is provided by Tim Wilson from the IPA in this paper on Intellectual property in a knowledge economy.

Commenting on this public health policy initiative Sinclair Davidson at Catallaxy says that Tobacco persecution continues. He says that both the increase in the tobacco excise and the plain packaging legislation are irresponsible and short-sighted.

However, in the latter Taxing fags: Repost at Catallaxy Davidson says that:

It is true that smoking has adverse health effects on smokers and non-smokers. This is well-known and has broad acceptance and understanding in the community and the incidence of smoking in the community has fallen dramatically in recent years.

So how does preventing people from dying from cancer square with the persecution of Big Tobacco? The latter implies a defence of Big Tobacco, the former implies the need to reduce smoking to prevent carcinogens.

So how do the right-of-centre libertarians square their circle?

| Posted by Gary Sauer-Thompson at 10:48 AM | | Comments (13)


Sinclair Davidson provides a useful service as a simple decision making heuristics tool...if you know what I mean.

Davidson does ask in the Taxing fags: Repost whether taxation is the best price signal that public policy can generate. It's a reasonable question given the traditional economic view that cigarette taxes are highly regressive. A regressive tax is one for which the poor pay a higher percentage of their income in taxes than do the rich:—a tax that hits the poor more than the rich.

Davidson responds to his question thus:

At the recent Henry Review Tax Conference Sijbren Cnossen made the argument that smokers pay for themselves. After you tally up all the additional taxes and consider reduced life expectancy and the like, smokers are not a net burden on society. In economic terms there is no smoking externality in equilibrium. To be sure non-smokers are not being compensated by smokers, but smokers have paid the government in full for their habit. Raising additional taxation on smokers is then just an exercise in revenue raising. There might be a case for that, but let’s not pretend this is a health measure.

That implies additional taxes are an economic extortion of smokers--they are a convenient source from which governments can extract revenue.

Gee smokers probably are subsidizing non-smokers. Smokers are doing Australia a huge favour by boosting tax revenue, dying early (and so saving on nursing home care and other health costs related to conditions associated with old age) and not drawing a pension. When those costs are computed hey more than offset the costs that smokers create. So the economic benefits of smoking to the country far outweigh the harmful effects.

Note Cnossen's assumption: early death is an economic benefit. Davidson doesn't question that cost savings from smokers' early deaths is one of the "positive effects" of cigarette consumption. Using this economic logic we could say that that deadly epidemics that eliminate the elderly in a population is a great economic blessing.

Interesting isn't. The defenders of Big Tobacco used to deny that cigarettes killed people. Now they celebrate it. Amazing.

Big Tobacco would be "concerned" about the proposed tax increase, which public-health experts advocate because demand for cigarettes falls as prices rise.

Smoking is a drug (the addictiveness of cigarettes ) and cigarette companies are the pushers. Big Tobacco are scum.

Probably off track but the following British research says that plain packing makes the product less desirable and users of the product lose status. It won't stop hardened users but it might stop teenagers from starting.

Are smokers paying the full cost of their habit? Probably not - but then I don't work in health care so I am unfamiliar with the myriad of ways in which people die slowly losing their independence and mobility by degrees.

If a smoker was alive one day then dead tomorrow then perhaps smokers do pay for their habit

The plain packaging is likely to have a significant impact and I think shows that the government is really starting to address the underlying problem - the uptake of cigarettes as a status good which then transfers into a physiological addiction.

It also shows how fundamentally weakened the power of the tobacco lobby has become, in comparison to say, the food industry, which really should be facing far more regulation upon it's advertising strategies than it currently does.

Without even considering the social harms, or the ethics of companies selling products that they know are poisonous to their customers, I would be highly suspicious of any study that showed smoking to be a net economic benefit. I don't know that 'the like' includes but I would not be surprised if it doesn't include a whole lot of things that are negatives for society as a whole.

The public health issue is, firstly, to ensure behavioral change to reduce smoking and, secondly, the extent to which higher taxes (excise taxes) cause smokers to quit or cut back.

The public health argument is that consumption behaviors would change in response to taxes. If people are “forced” to quit as a result of higher prices, then they are they better off. If a high cigarette tax forces the poor to cut back by more than the rich cut back, then the poor benefited more from the tax than the rich.

The argument is that higher cigarette prices do cause the poor to cut back on smoking more so than the rich Since, by definition, the poor have less money to spend than the rich, higher prices generally affect the poor more than the rich in regard to any good, whether dental care, cars, fresh fruit, junk food, or cigarettes.

The question is: do high cigarette taxes result in less smoking amongst poorer smokers?

People respond differently to tax increases: some will quit, others will cut back, and still others will not change their smoking behavior at all.

Higher cigarette taxes would cause hardship among some poor individuals who find it difficult to quit because of their addiction.

dj mentioned food companies and I hope they're next in line. Rudd says he's doing this in line with recommendations on preventative health care, so I'd like to see health warnings and pictures of morbidly obese people on some food packaging, for the sake of consistency.

other questions economists ask about harmful goods like cigarettes are:

How much should smokers be charged to cover the damage they cause to other people?

Isn't the use of excise taxes in excess of these costs in order to curtail smoking a form of paternalism which violates the principle of consumer sovereignty?

Shouldn't market failures, e.g. health effects from passive smoking, be remedied through regulation and by better dissemination of information on the hazards of smoking instead of increases in the tobacco excises?

Are the exceedingly high tobacco taxes a breeding ground for Mafia type of smuggling activities?

Sijbren Cnossen argues here that the externality argument for further increases in the level of tobacco taxation is not persuasive, because smokers appear to pay their way. The Government's approach seems defensible if market imperfections, such as information failures, are involved, but smells of paternalism with regard to rational tobacco consumers.

Its a novel idea plain label smoke packets but just an idea that will likely remain an idea. Whats next plain label beer? Plain label foods because they could be high in cholesterol? Plain label footy teams because sometimes players get hurt?
But it is a nifty way of introducing a new tax on cigarettes.
I would be inclined to think passing a law that cigarettes MUST NOT CONTAIN ADDICTIVE CHEMICALS so people don't become addicted to them would be a better way to go. But there would be little profit for the tobacco companies or the government then.

So Abbott can say nothing more about the public health measures re smoking than it is a panic tax by a government addicted to spending. It is just a tax grab and has nothing to do with health policy. Once again he rejects the idea that the market pricing can change individual behaviour.

The Coalition also refused to support the more significant reform of plain packaging; even though this makes it harder for Big Tobacco to target young people and get them hooked on their brand through packaging image and mystique. The packaging says that smoking makes a statement about who you are.

So the Coalition are, in effect, supporting Big Tobacco and by implication smoking, despite cigarettes killing half of long term users. They don't seem to realize that cigarettes are not normal consumer products. Is the Coalition suggesting that the moral and political arguments for attacking tobacco companies are not sound?

They imply this when they say that the objective of Rudd and Roxon's announcement is to distract public attention from the government's numerous policy backflips during the past week. This may be so, but the measures are more than a smokescreen.

I notice the Coalition proposes nothing with respect to reducing smoking in the population. It's just reflexive opposition by a party that continues to take the tobacco companies ' money.

I'm waiting patiently to read a recycling of this kind of junk in The Australian:

Working-class culture is under assault by political elites seeking to denormalise a way of life.... It may sound anachronistic but working-class communities are experiencing an invasion of the public health toffs (PHTs). The primary object of the PHTs' ire is Average Joe, the stereotypical, overweight, working-class male who's a junk food addict and a betting shop regular, when he isn't impersonating a beer-swilling, chain-smoking couch potato – and they're also not fond of Average Jane's "addiction" to an artificial tan.Joe and Jane are the subject of a PHT-designed regulatory experiment to improve their habits and preferences in order to improve the nation's health.

I'm waiting for Janet Albrechtson to cut and past this junk:
This assault on their culture is justified by the PHTs' acceptance of health paternalism, which provides the driving force behind the regulatory assault on inappropriate eating, drinking, smoking, gambling, and even tanning. For the PHTs, all of these activities are inappropriate because they pose unacceptable risks to healthy living.

That would then give Abbott and Dutton their cue to kick out at the health paternalism of Labor, junk health science, the war on what PHTs consider illegitimate, even immoral, pleasure, and to defend the authentic working class culture of Howard's Battlers.

Abbott is firing up the base---those Peter Hartcher calls the centre-right, lower- to middle-income, outer-metropolitan voters who were formerly known as ''Howard battlers''--and so he will defend the smokers with his panic tax revenue raising line.

That doesn't appeal to the middle ground though. Hartcher points out that Abbott he is trying to do that with his Rudd's broken promises, all reviews no action line. It points to Rudd's character and his capacity to act as a reformer.

Will those who become disillusioned with Rudd's failure to deliver then vote for Abbott?