Taxation to Raise Money and Change Behavior

In software, we have a saying.  “It’s a dessert topping and a floor wax” (from a very old episode of Saturday Night Live).  Politicians make this misstake too.  Jammiewearingfool quotes the NY Post about a recent increase in the cigarette tax in NY City:

State cigarette sales will plummet by 160 million packs a year, they said, and tens of thousands of New York kids won’t die prematurely from smoking. Plus, state tax revenue will bulge by a cool $265 million this year.

What’s wrong with that?

Well, it’s hard to tell.  The reporter didn’t bother to provide any figures.  But if this is just regurgitation of the numbers provided by the legislator who sponsored the bill, then there is something wrong.  Often, they double-count the numbers.  You can use this trick to multiply the current number of boxes of cigarettes sold by the new tax and come up with $265 million.  And at the same time you can claim to reduce the number of cigarettes sold by 160M packs (which is probably made up out of thin air).

The tax can either raise money or change the behavior of the flock.  But not both.


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