Friday, February 25, 2011

Not what taxation is supposed to be for

An article describes a "homebrew" tobacconist in Brooklyn, who has decided to reveal her money-saving hobby in order to highlight her dislike of local anti-smoking regulations. She claims her homegrown tobacco saves her a lot of money, and more:

“It’ll make the antismokers apoplectic,” said Ms. Silk. “They’re using the power of taxation to coerce behavior. That’s not what taxation is supposed to be for.”

It's probably a common belief that taxation is not for discouraging things. After all, we tax income but want people to keep earnings, and we tax sales although we want people to keep spending. But on the other hand, we traditionally taxed imports (we do that less now) because we wanted to reduce them and push spending toward domestically produced goods.

In the case of things like smoking, which affects other people besides the smoker who chooses to smoke, taxes move the private costs faced by the smoker closer to the larger total costs borne by all citizens.

We could do a better job explaining these aspects of economics in high school and college!