On Arthur Laffer's Handbook Of Tobacco Taxation

Posted: 8/9/2014

Trigger

The Pacific Research Institute recently published Arthur Laffer’s 400 pages Handbook of Tobacco Taxation – Theory and Practice. This insitute goes by the motto “Promoting and Preserving Supply-Side Economics”.

Here is about the book:

“Laffer’s handbook advises governments to construct their tax systems based on four principles. These include:

1. CLEAR PRODUCT CATEGORIES – So that revenue is not lost in “loophole products,” setting precise tobacco product category definitions while amending and updating these categories.

2. SOLID TAX STRUCTURES – The excise tax structure should support stable and predictable collections and ensure, as much as possible, that excise tax increases translate into government tax revenue increases.

3. CORRECT TAX LEVELS – To prevent consumers from turning to lower priced products on the black market following tax increases, ensure the correct tax level is applied to each category.

4. EFFICIENT COLLECTION SYSTEM – To minimize administrative burdens on tax payers and tax collectors, and ensure efficient payment of tobacco taxes by all manufactures and importers.”

A Head Scratcher

Why a famous economist (of Laffer Curve fame) would write such a handbook/monograph on such a narrow topic beats me (I have to admit, as so often, I have not read the book).

I suspect it will be selling well perhaps because many libraries or treasury departments think it necessary to buy this handbook.

In the age of e-cigarettes and vaping this handbook seems so anachronistic!

A Critique

Any serious economist perhaps except for hilarious comedians like Nobel Laureate Paul Krugman would not promote, but call for the immediate phase out of all excise taxes. Simple as that!

Any serious economist knows that taxes are a wedge; taxes introduces distortions; somebody has to pay for it and the ever greedy governments can never have enough money.

Excise taxes in particular are ancient; they originated from some historic coincidence; they are mostly arbitrary, and have no place in a modern tax system.

Especially so called sin taxes are a sin committed by government!

Especially so called sin taxes are a sin committed by government!

The more different taxes there are at any time side by side, the more complex the system; the more the citizen is fooled about the overall tax burden.