Tax Analysts Blog

Prohibition Through Taxation

Posted on Apr 10, 2013

I love stories like this. In 2010, Utah raised its excise tax on cigarettes from 69 cents to $1.70 a pack. Why did Utah do this? Call it prohibition through the tax code. A lot of folks in Utah don’t like smoking for moral reasons. They come to the same conclusion as obnoxious liberals from the Upper East Side, but from a different angle. They would like to see people stop smoking and hope to accomplish this goal through the tax laws. To be sure, some folks in Utah (and virtually every other state) see cigarette taxes as an opportunity to grab money for some good cause. And cigarette tax money grabs are easy when 1) smoking is bad for you, 2) the people who run the cigarette companies are jerks, and 3) not even the most progressive thinkers will criticize the regressivity of the tax. There might even be one person who thinks that the increased cigarette taxes are somehow tied to the externalities of smoking. That person would be a fool.

But here is what happens in a semi free society. People who want to engage in an activity that the government wants to ban somehow find a way. According to the Mackinac Center on Public Policy, one third of the tobacco smoked in Utah is smuggled in from states that have much lower taxes. The tax is 55 cents a pack in Wyoming, 57 cents a pack in Idaho, and 80 cents a pack in Nevada. So many Utahns figure manage to buy their cigarettes without paying the outrageous tax rates imposed by their state. While I am not a break the law kind of guy, I am neither surprise nor terribly upset that people do this. That someone wants to smoke, or drink, or do recreational drugs is no concern of mine. And it should not be the government’s concern. The Utah Tax Commission has an undercover SWAT team that is on the look out for people buying bootleg cigarettes. And that is a sad statement.

Read Comments (3)

David BrunoriApr 12, 2013

Herr von Gneisenau

Everybody's behavior affects people. You do not want to see drunk people in the
street. Unless you are living in Memphis or New Orleans is that a big problem?
I can think of 1,000 things I do not want to see -- really fat guys in tight
speedos on the beach comes to mind. But that is the cost of living in a free
society. That certainly is not a principle upon which we should level a tax. I
do agree with you on externalities. People who smoke impose costs on society.
The smokers and not you should bear those costs. But virtually no excise taxes
imposed in this country are tied to societal costs. Rather most are imposed
because we do not like certain behavior. As for me, I am one of those people
who think smoking and booze go together like peanut butter and jelly. If I am
ever walking down the street with you behind be me, I will either walk fast or
allow you to pass.

von gneisenauApr 13, 2013

"That someone wants to smoke, or drink, or do recreational drugs is no concern
of mine."

Whether or not one agrees with Utah on this, this libertarian viewpoint is only
libertarian on its face - if they do this without "externalities", sure but I
would rather not have someone carry a smoking cigarette for a mile as they walk
in front of me. I do not want drunk or stoned drivers on highways.

And those things also happen in a "free" society.

Finally, in a "not so free" society we will have ObamaCare extort more money
from all of us to pay for the morons who smoke and drink and their inevitable
health issues -

so, in theory, I might agree with you IF their behavior did not affect me, they
can do whatever they want - but I do not want to see them drunk on the street,
I do not want to smell their smoke and I do not want to pay for their health
care - can you make that happen?

von gneisenauApr 15, 2013

"Unless you are living in Memphis or New Orleans is that a big problem?"

Yes it is - but I will make sure not to visit those two cities either.

poor choice of words perhaps on my part in that last sentence. I can live with
visual externalites being dealt with outside of tax law - for example, by
anti-vagrancy laws - lying on a side walk - immediate ticket out of town - two
strikes and you are permanently out. No beaches for fat people, etc.

My point is not that this is a great use of tax policy but merely that sympathy
is lacking vis a vis the folks involved here

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