Another liberal tax increase that helps no one and hurts many

Another liberal tax increase that helps no one and hurts many

While I’m no longer a regular cigar smoker, I do still enjoy the occasional stogie while relaxing with my pastor, Fr. Tim Murphy, and several other friends in my parish. That’s why I’m outraged at the idea of a 20,000% tax increase on cigars to fund a state children’s health care program.

While it’s not necessarily the most important issue for me, apart from the inconvenience, it shows the incoherence of the liberal attitude toward taxes, as if they were a zero-sum game.

As some conservatives have pointed out, funding a children’s healthcare program with taxes on “deadly” behavior creates a moral imperative for the behavior. After all, it’s not the kids who are smoking cigars, so if the massive tax increase drives down cigar sales (and perhaps destroys the entire cigar industry), where do we get that $35 billion from next? What happens to the children?

Of course, it will never be $35 billion, because that number assumes that citizens’ behavior does not change due to a change in the environment, which any economist will tell you is ridiculous.

I’ve mentioned this story before: About 10 or 15 years ago, a prominent Democrat Senator asked the Congressional Budget Office to determine how much federal tax revenues would increase with a 100% tax on income over $1 million. Normal tax rates would apply to the first million you make, but every dollar over one million would be confiscated by the government as tax.

Of course, the CBO came back with a figure he didn’t expect: Zero. What the Senator didn’t take into account was that human nature being what it is, no one is going to take $2 million or $20 million or $200 million out of his company only to hand half or 90 percent or 99 percent over to the IRS. Better to keep it invested in the company (assuming that most of the big money earners are people with vested interests in their place of employment.)

There are a lot of reasons to think that this proposed tax is a bad idea: It’s unnecessarily punitive; it demolishes an entire industry; and it won’t accomplish the goal its backers claim it will.

[Link via Pro Ecclesia

From The Cleveland Leader:

Senate Considering Bill to Significantly Increase Cigar Taxes

The Senate Finance Committee is currently considering a bill that would result in a huge increase in the federal tax on cigars. Currently, the federal tax on cigars is at $0.05. The proposed bill could increase that to as much as $10.00, a 20,000% increase.

The bill is seeking to add $35 billion in funds to the State Children’s Health Insurance Program, which helps uninsured children get the healthcare they need. The Senate Plan is to fund the increase in children’s healthcare funds by increasing taxes on tobacco products.

President Bush has already said that if this bill were to pass, he would veto it.

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  • I don’t understand why politician can’t adopt the simple task scheme I have been asking for.  Here it is:  Everyone gets to keep the first $20,000 or some other amount that is determined as being the bar essential to live on.  Above that everyone pays a flat rate.  That way everyone pays a similiar rate.  Rich people pay more, but poor and middle class don’t get royally screwed over.  I would also advocate credits and deductions for dependents (minor children, elderly and disabled relatives), married couples, charitable contributions, IRA and 401K contributions, and mortgage interest. But why not include deductions for things like college tuition.  Personally, I think this is much better than paying some bureaucrats to dole it out to people.

    Doesn’t that seem fair and reasonable?  Of course some lawyer wants to make it complex so he has a steady stream of confused clients every year at tax time who pay him a huge sum.

  • The “problem” with a flat tax is that it:
    1. Eliminates much of the work that CPAs and tax preparers do.
    2. Eliminates much of the work of the IRS
    3. Closes loopholes that lobbyists like to open.
    4. Takes away opportunities for politicians to (a) pander to the poor and middle class by exploiting envy of the rich and (b) hiding little tax changes in legislation
    5. Makes sense!

  • No matter what rate you tax or don’t tax things on, the bulk of the tax code is spent defining what “income” is. The actual rates occupy a miniscule portion of the tax code.

    Once you define something as not income, then you create incentives to re-characterize income as that excluded thing. This is what many Americans happily pay $$ to professionals to accomplish.

    So you can have a flat tax (what about a flat 20% tax on everything above $50,000) but the tax code will still be complex in order to define income. The fewer the exclusions from income, the less complex the tax code would be, of course.