ASH seeks to hit the poor where it hurts

This post was written by Reuben Bard-Rosenberg on February 23, 2009
Posted Under: Minorities,Puritanism

Action on Smoking and Health have become something of a fixture in the discussion of public health. A group which seeks to ‘eliminate’ the harm cause by tobacco, they seem to have a talent for getting heard and getting listened to.

So I was more than a little concerned to find that as the budget approaches, ASH are pushing for another above-inflation increase in the smoking tax. First off, two points need to be made:

1) Most of us know that the smoking tax is regressive, but fewer realise quite how hard it hits the poorest people in society. In 2007 the poorest 20 per cent of households spent a whopping 3.4% of their income just paying tobacco tax.
2) Smokers more than pay for the cost to the NHS. By most estimates smoking costs the NHS £1.5 billion. Smoking tax raises £7 billion.

Nonetheless, ASH want to raise the tax further. Are these people going around with their eyes closed? Are they not aware that the poor are now bearing the brunt of the biggest crisis for decades? Have they not noticed that nearly 2,000,000 people are now trying to get by without work?

Interestingly they do, in their 2008 submission to the chancellor of the Exchequer, acknowledge that the smoking tax is ‘strongly regressive’. They say however that this dilemma can ‘be resolved by making the greatest possible efforts to motivate and assist smokers to quit.’ Put another way, their approach is this:

We want a comprehensive effort to push smokers into quitting. Those smokers who co-operate, and who adjust their lifestyle in the way we think they should will be fine. Those who persist in smoking can go to hell.

They note that public opinion favours a rise in tobacco tax. This is hardly surprising: the vast majority of people do not smoke, but nonetheless benefit from the tax smokers pay. It is hardly remarkable that a majority can be brought round to the idea of milking a minority.

Most shockingly, they seem to see this distortion of government finances as something to be happy about. Increasing the smoking tax, they say, ‘raises revenue for the Treasury – reducing the need for taxes on jobs and investment.’ In other words it is a bloody good thing that corporation tax and income tax – both of which fall primarily on the better off – can be reduced at the expense of a relatively worse off minority.

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Reader Comments

Jack

I suspect that these cunts are more than aware of the burgeoning (in fact, it has been massive ever since the 1970s) ‘black market’ in tobacco products-ie waiting for the friendly man at the pub/bingo to come round selling cigs from Spain/North Africa/Turkey for 3 quid a pack rather than paying in excess of £6 at the newsagent. Especially so, when you consider that this applies overwhelmingly to those at the poorest end of society-people such as ourselves merely grumble a bit and then buy at Sainsbury’s nevertheless if we feel like a smoke (and we smoke much less anyway)-who naturally take counter measures to avoid this anti-redistributive and regressive policy.

#1 
Written By Jack on February 23rd, 2009 @ 3:38 pm
Reuben

Absolutely, they are indeed aware of it and are campaigning for tight measures to prevent it.

#2 
Written By Reuben on February 23rd, 2009 @ 3:46 pm
Sonny

Im guessing you tagged me as you wanted my thoughts on this…briefly:

1. if your figures are right about costs/revenue then you are right the tax is too high to be justified on grounds of “internalising the externality.”

2. aside from intervening in markets for efficiency reasons governments need to raise revenue, the way in which to do this which incurs the least distortion is to tax goods with inelastic demand (cf. Ramsey rule), unfortunately, as you point out, things which have inelastic demand are typically disproportionately consumed by the poor.

3. There is a (somewhat) reasonable argument for separating issues of equity from issues of efficiency (cf. first and second welfare theorems) which goes like this: raise tax in the least distortionary way and if you dont like the resulting distribution of income then redistribute using income (not prices), the problem with this is that income transfers are also distortionary.

4. There is some literature now that people have serious self-control problems in the short run, using this line of argument you could justify the increase by saying: people would really like to quit but cant in the short run, increasing the price helps them to quit. i agree that this is paternalistic, but what you could do is ask smokers how they would feel about an increase in the future (not now, obviously).

Hope this is helpful.

#3 
Written By Sonny on February 23rd, 2009 @ 9:20 pm