Colorado’s Marijuana Tax Revenue likely to fall over time like New York’s Cigarette Tax Revenue

Posted by PITHOCRATES - March 22nd, 2014

Week in Review

States with huge budget deficits are watching Colorado and their marijuana sales tax.  As they consider following Colorado.  The proponents of marijuana decriminalization point to Colorado and say, “See?  Make it legal and tax it.  And everybody wins.  People can smoke until they get lung cancer.  And the state can rack up tax revenue to pay for, of course, schools.  It’s always schools, you see, because if you oppose tax revenue for schools you hate children.  And taxing sin is good, too.  Because we shouldn’t be doing those nasty things anyway.  So sin taxes work.  Just look at how well those cigarette taxes are working (see As taxes on cigarettes go up, so does smuggling, study finds posted 3/22/2014 on FoxNews Politics).

More than half of the cigarettes for sale in New York are smuggled into the state illegally – the highest percentage in the country, according to a recent report from the Tax Foundation.

According to the non-partisan research group, increased excise taxes on cigarettes to discourage smoking have, in fact, created lucrative incentives for black market trafficking between states…

According to the U.S. Department of Justice’s Bureau of Alcohol, Tobacco, Firearms, and Explosives, even though authorities have taken steps to reduce cigarette smuggling, nearly $5 billion in revenue in 2010 was lost because of smuggling.

Well, as it turns out, sin taxes don’t work as well as they thought they would.  They increase crime.  Because smuggling cigarettes is less risky than smuggling class one narcotics.  For cigarettes aren’t illegal.  So criminals can turn from something more risky, like smuggling class one narcotics, to something less risky.  Smuggling legal cigarettes.  Tax revenue from Colorado’s marijuana tax will probably decline over time.  As a black market comes to Colorado to sell tax-free marijuana.  Just like a black market sells lower-taxed cigarettes in higher taxed cities.

So you have additional crime on the one hand.  A black market drug-dealer network much like what exists today.  But one that can operate in less fear as the penalty for getting caught is a lot less than what it used to be.  Making it easier for our kids to smoke marijuana.  Either by buying it from a better supplied illegal drug dealer.  Or stealing some from their parent’s stash.  Or someone else’s stash.  For there will be a lot of stashes to steal from.

So the crime element is bad.  But as the black market takes off tax revenue will fall from legal sales.  Just like it has for cigarettes.  Leaving an over-spending state still short of tax revenue.  But now with a marijuana black market that they must police.  And a state full of potheads that will likely NOT help the state produce the best and brightest for the high-tech jobs in their economy.  The higher-paying kind of jobs that pay more income taxes.  Because once you have your weed and some cool tunes what do you need a high-stressed job for?  Which will probably make the experiment in Colorado not go as they thought it would.  Something other states should consider before following Colorado down this road.

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Progressive and Regressive Taxes and Marginal Tax rates

Posted by PITHOCRATES - January 6th, 2014

Economics 101

(Originally published July 9th, 2012)

The Beatles fled Britain to Escape a Confiscatory Top Marginal Tax Rate of 95%

George Harrison wrote Taxman.  The song appeared on the 1966 Beatles album Revolver.  It was an angry protest song.  For George Harrison was furious when he learned what exactly the progressive tax system was in Britain.  In the song the British taxman is laying down the tax law.

Let me tell you how it will be
There’s one for you, nineteen for me
‘Cause I’m the taxman, yeah, I’m the taxman

Should five per cent appear too small
Be thankful I don’t take it all
‘Cause I’m the taxman, yeah I’m the taxman

That’s one for you, Mr. Harrison.  And nineteen for us.  The government.  Meaning that for every £20 the Beatles earned they got to keep only £1.  This is a 95% top marginal tax rate.  A supertax on the super rich imposed by Harold Wilson’s Labour government.  So if the Beatles earned £1 million because of their incredible talent and hard work touring in concert, working on new albums in the studio and making movies, of that £1 million they got to keep only about £50,000.  While the government got £950,000.  If they earned £10 million they got to keep about £500,000.  While the government got £9,500,000.  As you can see 5% is a very small percentage.  Which is why George Harrison got so angry.  The harder they worked the less of their earnings they were able to keep.

Is this fair?  George didn’t think so.  Nor did his fellow Beatles.  For they fled Britain.  Moved to another country.  Becoming tax exiles.  For they were little more than court minstrels.  Who the government forced to entertain them.  Earning a lot of money so they could take it away.  To help pay for an explosion in social spending Harold Wilson unleashed on Britain.  Socializing the UK like never before.  And all those social benefits required a lot of taxes.  Hence the progressive tax system.  And marginal tax rates.  Where the super rich, like the Beatles, paid confiscatory tax rates of 95%.

The Top Marginal Tax Rate was around 70% under President Carter and around 28% under President Reagan

As social spending took off in the Sixties and Seventies governments thought they could just increase tax rates to generate greater amounts of tax revenue.  For governments looked at the economy as being static.  That whatever they did would result in their desired outcome without influencing the behavior of those paying these higher tax rates.  But the economy is not static.  It’s dynamic.  And changes in the tax rates do influence taxpayer behavior.  Just ask the Beatles.  And every other tax exile escaping the confiscatory tax rates of their government.  Because of this dynamic behavior of the taxpayers excessively high tax rates rarely brings in the tax revenue governments expect them to.

Even when it comes to sin taxes government still believes that the economy is static.  Even though they publicly state that taxes on alcohol and tobacco are to dissuade people from consuming alcohol and tobacco.  (The U.S. funded children’s health care with cigarette taxes clearly showing the government did not believe these taxes would stop people from smoking).  Perhaps some in government look at sin taxes as a way to discourage harmful habits.  But the taxman sees something altogether different when they look at sin taxes.  Addiction.  Knowing that few people will give up these items no matter how much they tax them.  And that means tax revenue.  But unlike the progressive income tax this tax is a regressive tax.  Those who can least afford to pay higher taxes pay a higher percentage of their income to pay these taxes.  For sin taxes increase prices.  And higher prices make smaller paychecks buy less.  Leaving less money for groceries and other essentials.

Most income taxes, on the other hand, are progressive.  Your income is broken up into brackets.  The lowest bracket has the lowest income tax rate.  Often times the lowest income bracket pays no income taxes.  The next bracket up has a small income tax rate.  The next bracket up has a larger income tax rate.  And so on.  Until you get to the high income threshold.  Where all income at and above this rate has the highest income tax rate.  This top marginal tax rate was around 70% under President Carter.  Around 28% under President Reagan.  And 95% under Harold Wilson’s Labour government in Britain.  An exceptionally high rate that led to great efforts to avoid paying income taxes.  Or simply encouraged people to renounce their citizenship and move to a more tax-friendly country.

When the Critical Mass of People turn from Taxpayers to Benefit Recipients it will Herald the End of the Republic

Progressive taxes are supposed to be fair.  By transferring the tax burden onto those who can most afford to pay these taxes.  But the more progressive the tax rates are the less tax revenue they generate.  What typically happens is you have a growing amount of low-income earners paying no income taxes but consuming the lion’s share of government benefits.  The super rich shelter their higher incomes and pay far less in taxes than those high marginal tax rates call for.  They still pay a lot, paying the majority of income taxes.  But it’s still not enough.  So the middle class gets soaked, too.  They pay less than the rich but the tax bite out of their paychecks hurts a lot more than it does for the rich.  Because the middle class has to make sacrifices in their lives whenever their tax rates go up.

As social spending increases governments will use class warfare to increase taxes on the rich.  And they will redefine the rich to include parts of the middle class.  To make ‘the rich’ pay their ‘fair’ share.  And they will increase their tax rates.  But it won’t generate much tax revenue.  For no matter how much they tax the rich governments with high levels of spending on social programs all run deficits.  Because there just aren’t enough rich people to tax.  Which is why the government taxes everything under the sun to help pay for their excessive spending.

If you drive a car, I’ll tax the street,
If you try to sit, I’ll tax your seat.
If you get too cold, I’ll tax the heat,
If you take a walk, I’ll tax your feet.

Don’t ask me what I want it for
If you don’t want to pay some more
‘Cause I’m the taxman, yeah, I’m the taxman

Now my advice for those who die
Declare the pennies on your eyes
‘Cause I’m the taxman, yeah, I’m the taxman
And you’re working for no one but me.

This is where excessive government spending leads to.  Excessive taxation.  And confiscatory tax rates.  Taking as much from the wealth creators as possible to fund the welfare state.  And as progressive tax systems fail to generate the desired tax revenue they will turn to every other tax they can.  Until there is no more wealth to tax.  Or to confiscate.  When the wealth creators finally say enough is enough.  And refuse to create any more wealth for the government to tax or to confiscate.  Leaving the government unable to meet their spending obligations.  As the critical mass of people turn from taxpayers to benefit recipients.  Heralding the end of the republic.

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Excessive Sin Taxes on Alcohol in Britain does not create Higher Tax Revenue

Posted by PITHOCRATES - December 23rd, 2012

Week in Review

Potheads want to decriminalize marijuana because they like getting high.  Especially high school kids and college kids.  Who aren’t known for making responsible decisions.  Binge drinking, drunk driving, smoking cigarettes, stealing prescription drugs from their parents, unplanned pregnancies, sexually transmitted diseases, etc.  Things that just don’t happen much to married men and women raising a family in the suburbs.  Who actually grew up and became responsible adults.

But it’s just not the kids getting high.  There are a lot of ‘responsible’ adults who want to decriminalize marijuana, too.  Most of who spent their high school and college years stoned.  But they make a more responsible argument for the decriminalization of marijuana.  For it would end all of our budget woes if the government regulated and TAXED marijuana.  Equating getting high with responsible governing.  And if there is one thing we know whenever the government regulates and taxes something it encourages people to buy more of that something, flooding government treasuries with cash (see Alcohol duty fraud: Action needed, say off-licences by Emma Forde posted 12/22/2012 on BBC News Business).

UK tax authorities are not doing enough to tackle alcohol duty fraud, claims a leading off-licence chain.

Bargain Booze told the BBC that the number of stores telling HM Revenue and Customs that they face illegal competition is rising…

Alcohol duty fraud in the UK often involves exporting alcohol to the EU – untaxed – and then bringing it back into the UK with false paperwork.

This method exploits EU rules which state duty does not have to be paid on alcohol when it is being transferred between registered producers or wholesalers – it is only paid when it enters the marketplace.

But the BBC’s 5 live Investigates programme has learned that some lorries containing duty-unpaid alcohol meant for export never even leave the UK…

The illicit alcohol ends up in the hands of rogue wholesalers and retailers who then sell it on at prices which legitimate traders say are only possible if duty has been evaded…

Representatives from the alcohol retail industry claim the total cost to the Exchequer could be billions of pounds: “HMRC view the loss of revenue to the Exchequer at £1.2bn, but that excludes wine. Within the trade, the real cost to the Exchequer is viewed as something in excess of £4bn a year,” says Keith Webb…

The cash-and-carry owner, who did not want to be named due to fear of reprisal from criminal gangs, says it would have to pay around £19.35 for a box of six bottles of Echo Falls Chardonnay – of that, £11.40 would be duty.

The same amount and brand of lager would cost £16.56, with duty at £9.36 per case.

You just can’t add a 57-59% excise tax on something and expect the criminal element not to take advantage of that.  That’s just too juicy a profit to pass up.  And an easy and safe profit to make.  For they don’t have to traffic in an illegal substance.  They’re just doing the tax evasion part of illegal drug trafficking.  Making it a far less risky crime.  So why wouldn’t they exploit the government’s regulating and taxing of alcohol?  This is a gift handed to them on a silver platter.  And the same thing would happen with marijuana.

There is a problem with sin taxes.  The purpose of a sin tax is to dissuade people from participating in an unhealthy behavior.  Such as drinking and smoking.  So as they raise these taxes people buy less of these things.  Meeting the goal of a sin tax.  But if you use that same sin tax for revenue purposes you have a problem.  For the more you dissuade that behavior (i.e., the more you raise the tax rate) the less people will participate (i.e., the less tax revenue they collect).  The two (dissuading behavior and raising tax revenue) are mutually exclusive.  You can dissuade unhealthy behavior.  Or you can raise revenue.  But you can’t do both.  Which is why we have sin taxes and not outright prohibitions on these behaviors.

Governments are less interested in their stated purpose (dissuading unhealthy behavior) than they are in raising revenue.  For they are desperate to find new sources of revenue to pay for their irresponsible spending ways.  Which is why alcohol and tobacco products in the U.S. have very high excise taxes.  As well as laws setting minimum prices.  They say these are to protect the consumer from predatory pricing.  Something few consumers ever complain about.  Low prices are good.  The lower the better.  The only people hurt by predatory pricing are businesses that can’t compete at those lose prices.  And governments trying to collect confiscatory excise taxes on sinful behavior.  To avoid the problems they’re having in the UK with their alcohol duty fraud.

Governments don’t want criminals profiting off these high excise taxes by selling alcohol to consumers at lower prices.  They want the consumers to pay higher prices so they can give more of their income to the government.  To help pay for their irresponsible spending.  Which they never consider cutting to solve their budget problems.  They only consider new sources of revenue.   Or raising tax rates.  Which will happen with marijuana.  Opening the door for less risky profit taking for the criminal element the more they decriminalize it.  And the more they tax it.

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FT131: “If liberals say sin taxes hit low-income and young adults disproportionally they must know they have photo IDs.” -Old Pithy

Posted by PITHOCRATES - August 17th, 2012

Fundamental Truth

Liberals want to Tax the Poor while Looking Like they’re not Taxing the Poor

A sin tax is an excise tax.  An excise tax is a flat tax.  Everyone pays the same amount.  Which liberals/progressives find unfair.  As these taxes hit low-income people disproportionately.  Whether it’s someone living on low wages.  Or on limited government support.  They live on a small amount of money each week.  And if they buy alcohol or cigarettes those sin taxes consume a large proportion of their weekly spending money.  By greatly increasing the price for alcohol and cigarettes.  When you hear things like ‘placing a bulls-eye on Joe Six-Pack’s back’ it refers to a low-income guy that enjoys drinking beer.  But drinking beer is difficult for him to do because the current tax structure favors the rich.  Who can more easily afford excise taxes.

And it’s the same for cigarette smokers.  There has been a war on tobacco.  And it’s been so successful that a lot of college-educated people don’t smoke these days.  For it is politically incorrect to smoke today.  They’ve banned it from restaurants.  From the office.  Even outside in some places.  Some are even trying to ban it in people’s homes if they have children.  Progressives hate smoking so much that they have placed enormous sin taxes on cigarettes.  Making it very difficult for Joe Six-Pack to buy his cigarettes.  And it is the low-income and those without college educations who tend to smoke these days.  So the people who can least afford to pay these high sin taxes pay most of them.

Progressives want to raise tax rates on the rich.  Because they have more money and therefore should pay more in taxes.  According to them.  So they can transfer the cost of government away from the low-income to the high-income.  And they’ve succeeded.  Today almost half of all taxpayers pay no federal income taxes.  While the top 10% of earners pay approximately 70% of all federal income taxes.  Yet despite this huge transfer of wealth from the rich to the poor sin taxes have continued to rise.  Meaning the liberals want to tax the rich.  And they want to tax the poor.  While looking like they’re not taxing the poor.  By ascending their self-righteous soapboxes.  For they know better than we.  Sin taxes, they say, are for our own good.  They discourage bad behavior.  And encourage good behavior.  Behavior that they approve of.  And it’s only coincidental that they these taxes fall disproportionately on Joe Six-Pack.  Then they try to take the little income remaining from poor Joe by selling him lottery tickets.  Something else more lower income people buy than rich people.  For rich people are already rich.

Obamacare combines the Joy of a Colonoscopy with the Fear and Loathing of an IRS Audit

Most people would rather have a colonoscopy than sit through an IRS audit.  Why?  Because a colonoscopy is more enjoyable.  It only takes a couple of hours as an outpatient in the hospital.  Your odds are better for getting good news after a colonoscopy than after an IRS audit.  And doctors are happy to give good news to their patients.  While IRS agents are happy when they can take your money.  The more of it they can take the happier they are.  And with today’s tax code they can always find money to take from you.  Especially if you’re a business owner.  Or a movie star.  Where you can lose your pension, your children’s college fund and your house if you made a mistake or trusted an untrustworthy accountant.  So given the choice people would choose a colonoscopy over an IRS audit almost any day.  Even without the anesthetic.

And speaking of health care and the IRS, how about that Obamacare?  The liberals’ solution to ‘fix’ health care.  Even though it wasn’t broken.  Americans have long opposed any form of national health care.  They opposed it when Hillary Clinton tried to put a plan together behind closed doors.  And they still oppose it.  Based on that majority of the population that wants to repeal Obamacare.  Which they passed into law thanks to some backroom deals.  And fun with numbers.  The big selling point was to keep the cost of it below what the wars in Iraq and Afghanistan cost.  If the liberals could keep the price tag below a trillion dollars over a ten year period they could say it wouldn’t cost Americans an extra dime to give ‘free’ health care to everyone.  Because they would just transfer all of that war spending to health care spending.  Despite those trillion dollar deficits.  A debt approaching $16 trillion.  And an economy wallowing in the Great Recession.

So how did they do it?  Keep the cost under a trillion dollars?  By being devious.  The data they submitted to the Congressional Budget Office (CBO) included ten years of expenditures but only 6 years of benefits.  Because 6 years of benefits cost about a trillion dollars.  Well, almost.  They also stole about $700 billion from Medicare.  So the real cost of Obamacare over a ten year period is closer to $3 trillion.  Or about three times the cost of the wars in Iraq and Afghanistan.  How’s that for free health care?  So Obamacare is really, really expensive.  Which is why Obamacare forces all Americans to buy health insurance.  Even the young and healthy who would rather put that money into a house payment while they are young and healthy.  And how are they going to enforce this?  By combining the joy of a colonoscopy with the fear and loathing of an IRS audit.

Getting a Photo ID is too Costly, too Complex or just too Time Consuming unless you’re a 16-Year-Old Anxious to Drive

Because of Obamacare everyone will have to prove to the IRS that they have bought health insurance.  Which means if you want health care you better file your federal income taxes.  Have a Social Security number.  And have proven to your employer that you are a legal citizen.  With two pieces of documentation.  Like a Social Security card.  And a photo ID.  Pretty intense requirements.  And much more stringent than it used to be when anyone could go to the emergency room and receive treatment.  Today if you’re sick you better hope dotted your ‘i’s and crossed your ‘t’s.  Because in Obamacare before you can get a colonoscopy you have to first answer to the IRS.

And Joe Six-Pack?  We love you.  Because you’re just an average Joe.  The backbone of America.  Working hard and raising your family.  So who are we to begrudge you a cold beer after a hard day’s work?  Or a smoke?  We won’t judge you for enjoying those things.  Because a lot of us enjoy those things, too.  Even if it’s not politically correct.  Or in our best interests.  Or behavior those ‘better than us’ would approve of.  Just make sure you have your photo ID before you buy your beer.  Or your pack of smokes.  Because unless you look old you aren’t buying either without one.  Even if you’re a grizzled war veteran.  And been to hell and back in Iraq or Afghanistan.  Because even a Purple Heart won’t get you beer or a pack of cigarettes without a photo ID.

The liberals have made it harder for you to get health care.  Or to smoke.  And they’re not making it any easier to drink adult beverages.  If you want to do any of these things you better suck it up and get a photo ID.  Because proving who you are, how old you are and whether you are a legal citizen are very important to liberals.  Unless, that is, you want to vote.  Then they don’t give a damn.  They even say asking for a photo ID to vote is only a way to disenfranchise the low-income and young adults.  So they can’t vote.  Because getting a photo ID is too costly, too complex or just too time consuming.  (Except for all those 16-year-olds anxious to drive.)  Yet these are the very same people who acknowledge that the low income and young adults pay a disproportionate share of sin taxes.  Which they pay on those things you can only buy with a photo ID.

So why this bizarre and inconsistent behavior on the part of liberals?  Well, it must have something to do with the vote.  And based on their devious behavior in passing legislation people don’t want, one can only assume that their lax attitude is for one reason.  Making it easier for them to win elections when they pursue policies that the people don’t want.  Like Obamacare.  Which is why when it comes to the vote they want anyone to be able to walk in off the street and say they’re whoever they say they are and vote.  Unlike the ‘hell’ people have to go through to buy a beer, a pack of cigarettes, getting a job or collecting their lottery winnings.  Yes, if you win the big one you’ll need a photo ID to claim your money.  But you don’t need it to vote.  Because voting just isn’t as important as these other things.

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Progressive and Regressive Taxes and Marginal Tax rates

Posted by PITHOCRATES - July 9th, 2012

Economics 101

The Beatles fled Britain to Escape a Confiscatory Top Marginal Tax Rate of 95%

George Harrison wrote Taxman.  The song appeared on the 1966 Beatles album Revolver.  It was an angry protest song.  For George Harrison was furious when he learned what exactly the progressive tax system was in Britain.  In the song the British taxman is laying down the tax law.

Let me tell you how it will be
There’s one for you, nineteen for me
‘Cause I’m the taxman, yeah, I’m the taxman

Should five per cent appear too small
Be thankful I don’t take it all
‘Cause I’m the taxman, yeah I’m the taxman

That’s one for you, Mr. Harrison.  And nineteen for us.  The government.  Meaning that for every £20 the Beatles earned they got to keep only £1.  This is a 95% top marginal tax rate.  A supertax on the super rich imposed by Harold Wilson’s Labour government.  So if the Beatles earned £1 million because of their incredible talent and hard work touring in concert, working on new albums in the studio and making movies, of that £1 million they got to keep only about £50,000.  While the government got £950,000.  If they earned £10 million they got to keep about £500,000.  While the government got £9,500,000.  As you can see 5% is a very small percentage.  Which is why George Harrison got so angry.  The harder they worked the less of their earnings they were able to keep.

Is this fair?  George didn’t think so.  Nor did his fellow Beatles.  For they fled Britain.  Moved to another country.  Becoming tax exiles.  For they were little more than court minstrels.  Who the government forced to entertain them.  Earning a lot of money so they could take it away.  To help pay for an explosion in social spending Harold Wilson unleashed on Britain.  Socializing the UK like never before.  And all those social benefits required a lot of taxes.  Hence the progressive tax system.  And marginal tax rates.  Where the super rich, like the Beatles, paid confiscatory tax rates of 95%.

The Top Marginal Tax Rate was around 70% under President Carter and around 28% under President Reagan 

As social spending took off in the Sixties and Seventies governments thought they could just increase tax rates to generate greater amounts of tax revenue.  For governments looked at the economy as being static.  That whatever they did would result in their desired outcome without influencing the behavior of those paying these higher tax rates.  But the economy is not static.  It’s dynamic.  And changes in the tax rates do influence taxpayer behavior.  Just ask the Beatles.  And every other tax exile escaping the confiscatory tax rates of their government.  Because of this dynamic behavior of the taxpayers excessively high tax rates rarely brings in the tax revenue governments expect them to.

Even when it comes to sin taxes government still believes that the economy is static.  Even though they publicly state that taxes on alcohol and tobacco are to dissuade people from consuming alcohol and tobacco.  (The U.S. funded children’s health care with cigarette taxes clearly showing the government did not believe these taxes would stop people from smoking).  Perhaps some in government look at sin taxes as a way to discourage harmful habits.  But the taxman sees something altogether different when they look at sin taxes.  Addiction.  Knowing that few people will give up these items no matter how much they tax them.  And that means tax revenue.  But unlike the progressive income tax this tax is a regressive tax.  Those who can least afford to pay higher taxes pay a higher percentage of their income to pay these taxes.  For sin taxes increase prices.  And higher prices make smaller paychecks buy less.  Leaving less money for groceries and other essentials.

Most income taxes, on the other hand, are progressive.  Your income is broken up into brackets.  The lowest bracket has the lowest income tax rate.  Often times the lowest income bracket pays no income taxes.  The next bracket up has a small income tax rate.  The next bracket up has a larger income tax rate.  And so on.  Until you get to the high income threshold.  Where all income at and above this rate has the highest income tax rate.  This top marginal tax rate was around 70% under President Carter.  Around 28% under President Reagan.  And 95% under Harold Wilson’s Labour government in Britain.  An exceptionally high rate that led to great efforts to avoid paying income taxes.  Or simply encouraged people to renounce their citizenship and move to a more tax-friendly country.

When the Critical Mass of People turn from Taxpayers to Benefit Recipients it will Herald the End of the Republic

Progressive taxes are supposed to be fair.  By transferring the tax burden onto those who can most afford to pay these taxes.  But the more progressive the tax rates are the less tax revenue they generate.  What typically happens is you have a growing amount of low-income earners paying no income taxes but consuming the lion’s share of government benefits.  The super rich shelter their higher incomes and pay far less in taxes than those high marginal tax rates call for.  They still pay a lot, paying the majority of income taxes.  But it’s still not enough.  So the middle class gets soaked, too.  They pay less than the rich but the tax bite out of their paychecks hurts a lot more than it does for the rich.  Because the middle class has to make sacrifices in their lives whenever their tax rates go up. 

As social spending increases governments will use class warfare to increase taxes on the rich.  And they will redefine the rich to include parts of the middle class.  To make ‘the rich’ pay their ‘fair’ share.  And they will increase their tax rates.  But it won’t generate much tax revenue.  For no matter how much they tax the rich governments with high levels of spending on social programs all run deficits.  Because there just aren’t enough rich people to tax.  Which is why the government taxes everything under the sun to help pay for their excessive spending. 

If you drive a car, I’ll tax the street,
If you try to sit, I’ll tax your seat.
If you get too cold, I’ll tax the heat,
If you take a walk, I’ll tax your feet.

Don’t ask me what I want it for
If you don’t want to pay some more
‘Cause I’m the taxman, yeah, I’m the taxman

Now my advice for those who die
Declare the pennies on your eyes
‘Cause I’m the taxman, yeah, I’m the taxman
And you’re working for no one but me.

This is where excessive government spending leads to.  Excessive taxation.  And confiscatory tax rates.  Taking as much from the wealth creators as possible to fund the welfare state.  And as progressive tax systems fail to generate the desired tax revenue they will turn to every other tax they can.  Until there is no more wealth to tax.  Or to confiscate.  When the wealth creators finally say enough is enough.  And refuse to create any more wealth for the government to tax or to confiscate.  Leaving the government unable to meet their spending obligations.  As the critical mass of people turn from taxpayers to benefit recipients.  Heralding the end of the republic.

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Tobacco, Smoking, Cigarettes, Sin Taxes, Obesity, Health Care Costs, Lost Tax Revenue, Abortion, Deficit and Debt

Posted by PITHOCRATES - June 5th, 2012

History 101

The Government saves Money in the Long Run when People Smoke because they Die Earlier than Nonsmokers 

A lot of people like to smoke.  Before we knew any of the adverse health effects of smoking it was as wholesome as apple pie in America.  American tobacco was one of the first cash crops of the United States.  Because it was in such high demand throughout the world.  During the American Civil War many officers chain-smoked cigars.  We put cigarettes in our soldiers’ C-rations in World War II.  Some of the most iconic photographs of battle-weary soldiers, seamen and airmen have a cigarette dangling from their mouths.  Our favorite parents from the Fifties’ sitcoms smoked cigarettes in their homes with their children playing on the floor at their feet.  If you watch AMC’s Mad Men everyone smoked cigarettes.  All of the time.  At work and at home.  In restaurants and in hospitals.  Even while pregnant.  Then the attacks against Big Tobacco began.

First they started with the sin taxes.  Greatly increasing the cost of cigarettes.  Which increased their opportunity costs.  People had to give up other things to continue to enjoy their cigarettes.  Especially the poor.  The rich still could enjoy their cigarettes without making sacrifices in their life.  And kept on smoking.  Movie stars and rock stars always have a cigarette hanging out of their mouths.  To look cool.  Which is why teenagers started to smoke.  Not because of Joe Camel.  But to look cool like their favorite movie stars and rock stars.  So people kept smoking their cigarettes.  While the government bureaucrats started tallying the health care cost of smokers.  To recover the health care cost of smoking government bureaucrats sued Big Tobacco.

According to ‘health care experts’ in the government smoking costs the health care industry some $100 billion annually.  Which is why they’re constantly raising taxes on cigarettes.  Why they sued Big Tobacco.  And why they’re ostracizing smokers everywhere by making almost every area a nonsmoking area.  But they still haven’t made smoking illegal.  Why?  High sin taxes and lawsuits.  Smoking is a cash cow for government.  And the dirty little secret about smoking is that the government saves money in the long run when people smoke.  Because of those sin taxes.  And because smokers die earlier than nonsmokers.  Up to a decade or more.  And it is in that last decade of life that seniors cost government the most.  Another decade of Social Security benefits.  And Medicare and Medicaid benefits.  Those benefits smokers paid into all of their lives.  Who forfeit them when they die early (and they don’t get passed on to their heirs).  Unlike the nonsmokers who don’t have the decency to die before collecting all of their Social Security and Medicare benefits.  Adding another decade or so for a whole sort of health ailments to inflict their fragile bodies.  Requiring more hospitalization.  Medication.  And nursing home care.  Expenses smokers help cut short by dying earlier.  Such as from an early heart attack before they even get a chance to have a lengthy and expensive hospital stay.

The Loss Tax Revenue from Abortions in the Eighties over Three Decades is Approximately $4.98 Trillion 

So government is increasing the opportunity costs of something people enjoy.  Smoking.  When in the long run smokers’ early deaths save the government money.   Not to mention those sin taxes fattening the tax pot when they’re alive.  So it’s a specious argument that the government is spending more on them in health care costs than nonsmokers who live another 10-20 years.  So why do they do it?  To boost tax revenues.  And smokers are just a convenient scapegoat.  Like the obese.  Where those on the Left make the same arguments.  Where according to ‘health care experts’ in the government obesity costs the health care industry some $150 billion annually.  Even though these people like smokers live shorter lives.  So while they’re consuming that $150 million the government is keeping about 10-20 years of their contributions to Social Security and Medicare.  So it is again a specious argument that the government is spending more on obese people than thinner, healthier people who live 10-20 years longer.  Who could, say, fall and break their pelvis requiring an extensive and expensive hospital stay.  As well as rehabilitation and possibly nursing home care.  And yet those on the left have campaigned to remove toys from Happy Meals.  And made it illegal in New York to buy a big cup of soda pop.  Why?  Again, to boost tax revenue.

All right, let’s go to the source of that tax revenue problem.  Let’s look at a decade of lost tax revenue.  From 1980 to 1983 there were about 1,300,000 abortions each year.  In 1984 there were 1,333,521 abortions.  In 1985 there were 1,328,570 abortions.  In 1986 there were 1,328,112 abortions.  In 1987 there were 1,353,671 abortions.  In 1988 there were 1,371,285 abortions.  In 1989 there were 1,396,658 abortions.  In 1990 there were 1,429,577 abortions. 

Had these abortions not happen in 2006 there would have been an additional 1,300,000 taxpayers aged 26.  In 2007 there would have been an additional 1,300,000 taxpayers aged 27 and an additional 1,300,000 taxpayers aged 26.  And so on.  If you crunch the numbers over a 30-year period by decades you get an additional 72,006,665 people paying taxes at all levels of government in the first decade (2006-2015).  An additional 146,913, 940 tax-paying people in the second decade (2016-2025).  And an additional 88,169,092 tax-paying people in the third decade (2026-2035).  The average age in the first decade is 29.  It’s 32 in the second decade.  And 42 in the third decade.  Assuming those age 29 earn on average $30,000 annually, those age 32 earn on average $40,000 annually and those age 42 earn on average $50,000 we get the following incomes per decade: $2.16 trillion, $5.88 trillion and $4.41 trillion, respectively.  Assuming that we pay approximately 40% of all our earnings in taxes at the city, state and federal level the lost tax revenue (at all levels of government) for those same decades equals $864.1 billion, $2.35 trillion and $1.76 trillion, respectively.  For a grand total of loss tax revenue for those three decades of approximately $4.98 trillion.  Or on average $165.9 billion per year.  These numbers are conservative.  Yes, some of these people may not survive to become taxpayers.  But some of these could become millionaires and billionaires, paying more in taxes.  There could have been another Lady Gaga, Madonna, Oprah Winfrey, Warren Buffet, Bill Gates, Barbara Streisand, George Clooney, Steve Jobs, etc.  A few of these added to the calculations would make the lost tax revenue numbers larger.

From the Government’s Perspective Abortion has a Far Greater Opportunity Cost than Smoking and Obesity 

This is the opportunity cost of the abortions in the Eighties.  So much loss tax revenue that the government has attacked smokers and the obese.  Whose health care costs are not adding much if anything to the federal budget.  Thanks to their early deaths compared to nonsmokers and thin people.  (If the government starts refunding remaining Social Security and Medicare benefits to the surviving family that may change.)  Yes they are costing the health care system.  But their costs are just brought up earlier in their lives as opposed to someone living 10-20 years longer making the nursing home to hospital to nursing home roundtrip a few times in the last 10 years or so of their life.  Because they have lived so long.  And had a chance to suffer every disease and trauma those smokers and obese can’t due to their early deaths.

It is interesting to note that the federal deficit in 2006 was $282.14 billion.  The lost tax revenue from the Eighties’ abortions was on average $165.9 billion per year in those three decades.  Granted not all of that money would have been federal taxes.  But with the conservative estimate of that loss tax revenue it is safe to say it would have come close to balancing the federal budget.  And if you factor in the abortions of the Seventies (there were fewer than in the Eighties but they would have been higher earners in the 2000s) the federal deficit may have become a surplus.  At least holding the federal debt to the $9.34 trillion it was in 2006.  Perhaps even reducing it.

Smoking and eating an unhealthy diet may be bad for you.  But it probably doesn’t cost the government anymore in tax dollars.  But they increase the opportunity costs of these things we enjoy to dissuade us from enjoying them.  So those who enjoy smoking and eating and drinking ‘bad’ things enjoy life less.  By not choosing what they want to choose.  Why? To pay for the lost revenue from another choice that government doesn’t try to dissuade people from.  Abortion.  Which from the government’s perspective has a far greater opportunity cost than smoking and obesity.  And yet government paints a bulls-eye on the back of smokers and the obese.  Why?  Because they’ve so demonized and oppressed them they can.  While the abortion issue too much of a sacred cow to those on the Left.

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High Sin Taxes on Alcohol causes Death and Blindness from Drinking Fake Vodka

Posted by PITHOCRATES - December 31st, 2011

Week in Review

Britain’s tax policy on alcohol is killing poor people (see Fake vodka warning issued by council trading standard teams posted 12/30/2011 on BBC News UK).

Fake vodka recently seized had high levels of methanol, which can cause blindness, and industrial solvents…

The Local Government Association in England and Wales said fake vodka could cause death…

Mr Bettison went on: “Everyone wants a bargain, especially at this time of year, but surely the potential health risks far outweigh any financial savings. Purchasing it also does nothing to help legitimate businesses stay afloat.

Buying ‘bargain’ alcohol is not fair to legitimate businesses because legitimate businesses have to charge all those sin taxes that their customers ultimately have to pay.

Sin taxes punish the poor.  Either by leaving them poorer.  Or by killing them when they drink a ‘bargain’ vodka brand they can more readily afford.

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England is Raising Taxes on Alcohol to pay for out of control NHS Costs

Posted by PITHOCRATES - December 31st, 2011

Week in Review

Sin is great.  For government.  Because they get to tax it (see David Cameron plans minimum alcohol price in England by Robert Winnett, and Rowena Mason posted 12/27/2011 on The Telegraph).

The Prime Minister has ordered officials to develop a scheme in England to stop the sale of alcohol at below 40p to 50p a unit in shops and supermarkets.

Ministers could copy Scottish proposals, which would ban the sale of alcohol below 45p a unit, or bring in a more sophisticated system of taxes based on the number of alcohol units contained in the drink.

Both options would cost drinkers an estimated extra £700 million a year, with any extra tax revenue potentially going to the NHS…

A recent official study found that setting a minimum price of 30p per unit would prevent 300 deaths a year, 40p about 1,000 deaths, and 50p more than 2,000 premature deaths…

Figures published earlier this month showed that twice as many people were being treated in hospital because of alcohol misuse compared with 10 years ago.

Alcohol is linked to more than one million admissions to hospital each year, about 13,000 new cases of cancer and one in four deaths of people aged 15 to 24.

This is the problem when other people pay for your health care.  Your personal life becomes other people’s business.  Because they’re paying your way.  With higher taxes.  In this case, higher sin taxes.

If this is all about the cost then they should look at this from a more pragmatic point of view.  And cut taxes.  For according to their studies this will kill thousands of people prematurely.  Before they can become a burden on the National Health Service (NHS).

Of course, they won’t.  Because it’s not about preventing deaths or keeping people out of hospital.  It’s about the tax revenue.  And out of control NHS costs.  Which no amount of sobriety can fix.

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Decriminalizing Drugs and Criminalizing McDonald’s Happy Meals and Parents

Posted by PITHOCRATES - December 27th, 2010

The Left Pushes to Criminalize and Tax Unhealthy Food and Lifestyles

San Francisco passed legislation banning toys in McDonald’s Happy Meals.  Because they encourage an unhealthy lifestyle.  And if there’s one thing liberal busy bodies want is for us to live a healthy lifestyle.  So they’re not food Nazis.  They just care.  They want what’s best for us.  And whether we want it or not, we should listen to them.  Because it’s for our own good.

And speaking of food Nazis, Michelle Obama isn’t one.  She just wants to step in between our kids and their parents.  Because she knows best what our kids should eat.  And to stop what is a coordinated marketing/policy assault against these kids.  Keeping them from enjoying the healthy diet they could.  If only we could broom their parents aside.

Locked in their crosshairs are sugary drinks.  And as they propose to solve every problem, they propose to solve this problem with a tax (see Sarah Palin’s nightmare: What Michelle Obama dares not propose by Stephen Stromberg posted 12/27/2010 on The Washington Post).

But everyone should favor eliminating sugar subsidies. And corn subsidies, since high-fructose corn syrup is a ready substitute for sugar. They’re expensive for taxpayers, they encourage unhealthy eating, and the benefits generally go to wealthy agribusinesses that don’t need them. A model of obviously terrible federal policy. And, given how much sugary drinks contribute to obesity and, therefore, impose costs on society that their prices don’t reflect, modest soda taxes aren’t a bad idea, either. Something like a cent and ounce, which a group of doctors, researchers and policy advocates proposed last year in the New England Journal of Medicine.

And it’ll be a windfall for the federal government.  Just like those sin taxes on tobacco and alcohol.  I mean, golly, if they outlawed tobacco and alcohol, the government would take a huge pay cut.  And when was the last time you heard about government getting by on less?  Try never.  So sugary drinks will stay.  Fear not.  They just want to tax the bejesus out of them.

But it’ll be for our own good.  Because they do care for us, don’t they?

You may not feel it, but if you pay taxes, you’re subsidizing others’ unhealthy lifestyles every day, either through direct subsidy of their ingredients or through higher medical bills, the costs of which are often socialized. These policies aren’t about making bad-for-you foods unnaturally expensive. Sugary drink taxes and other such things are about not making pancreas-busting foods deceptively cheap.

Gosh, they care.  It gives you a warm fuzzy to know how much they care for our good health.

The Left Pushes to Decriminalize Drugs and Subsidize Addiction

Meanwhile, the same people who want to take toys out of Happy Meals want to help put heroin in people’s veins.  The Left is all about a managed economy but believes in an ‘anything-goes’ social policy.  Grass, smack, crank, whatever.  If you want to get high, go for it.  The Left is always floating trial balloons for decriminalizing drugs.  They’ve done it in Portugal.  And some U.S. Officials are looking to do likewise (see On the Ground: When drugs are decriminalized by Barry Hatton, AP Lisbon, posted 12/27/2010 on Facebook).  Here’s what it’s like in Portugal.

On a recent fall day Americo Nave, a 39-year-old psychologist, and two other health workers drove their white van along the main cobbled street of Casal Ventoso, a neighborhood in Lisbon, Portugal, that once was synonymous with drug delinquency and a no-go area for the authorities.

So how did they clean up this drug-infested neighborhood?

About a dozen addicts, mostly unkempt men aged 20 to 40, ambled up. They were orderly and respectful. They looked frail, more in need of a hospital bed than a prison cell.

To receive fresh needles, the addicts must first drop used ones into a plastic container on the ground. In return they get a bag containing needles, swabs, little dishes to cook up the injectable mixture, disinfectant, and a condom, all paid for by charities and taxpayers.

And how has it been working?  Well, according to one homeless skeletal heroin addict.

A 37-year-old man who gave his name only as Joao said he had been consuming heroin for the past 22 years. He recalled living rough in Casal Ventoso and picking up used, bloody needles from the sidewalk to inject himself. He contracted Hepatitis C. Now he comes regularly to the needle exchange and also gets help with food and health care.

“These teams … have helped a lot of people,” he said, struggling to concentrate as he drew deeply on a cigarette.

Yes, they’re helping people.  There’s nothing like a good heroin addiction subsidized by the state to make one feel loved.

Taxing Sugary Drinks, Fast Food and Heroin – What the Left Wants

Not everyone who eats at McDonald’s gets obese.  But most people who try heroin become addicts.  An obese person may live a normal life well into their 40s or 50s.  A heroin addict has no life.  Once addicted it’s just a slow death as the body’s organs slowly fail.  And yet the Left deems that Happy Meals are bad and want to criminalize them.  While at the same time they want to decriminalize heroin.  And subsidize addiction.

You know why they want to decriminalize drugs?  For the same reasons they tax tobacco and alcohol.  And want to tax sugary drinks.  They want the tax revenue.  To try and satiate their insatiable appetite to tax and spend.  And to micromanage our lives.  Not to keep us healthy.  If they wanted that they wouldn’t have rationed our healthcare by passing Obamacare.

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LESSONS LEARNED #19: “Philosophical debates can be effective but character assassination is more expedient, especially when no one agrees with your philosophy.” -Old Pithy

Posted by PITHOCRATES - June 24th, 2010

THOMAS JEFFERSON HATED Alexander Hamilton.  So much so he hired Philip Freneau as a translator in his State Department in George Washington’s administration.  You see, Jefferson did not like confrontation.  So he needed a way to slander Hamilton, his policies and the Washington administration without getting his own hands dirty.  And that was what Freneau was supposed to do with the money he earned while working in the State Department.  Publish a newspaper (National Gazette) and attack Hamilton, his policies and the Washington administration.  Papers then were partisan.  More so than today.  Then, lies and libel were tools of the trade.  And they knew how to dig up the dirt.  Or make it up. 

Another scandalmonger, James Callender, was slinging dirt for Jefferson.  And he hit pay dirt.  Mr. and Mrs. Reynolds of Philadelphia had a lucrative business.  They were blackmailing Alexander Hamilton.  Mr. Reynolds had his wife seduce Hamilton.  Which she did.  And did well.  They had an affair.  And Mr. Reynolds then blackmailed him.  Jefferson pounced.  Or, rather, Callender did.  To keep Jefferson’s hands clean.  Hamilton, Callender said, was using his position at the Treasury Department for personal gain.  He was using public funds to pay the blackmailer.  They found no proof of this.  And they did look for it.  Hard.  But when they came up empty, Jefferson said that it just proved what a good thief Hamilton was.  He was so good that he didn’t leave any traces of his treachery behind.

Of course, when you lie down with dogs, you get up with fleas.  And Jefferson’s association with Callender would come back and bite him in the ass.  In a big way.  Upset because Jefferson didn’t appropriately compensate him for all his loyal dirt slinging (he wanted the postmaster’s job in Richmond), he publicized the Sally Hemings rumors.  And after breaking the true story of the Hamilton affair, many would believe this scoop.  That Jefferson was having an affair with one of his slaves.  It was a dark cloud that would forever hang over Jefferson.  And his legacy.

Hamilton admitted to his affair.  Jefferson admitted to no affair.  Hamilton would never hold public office again and would later die in a duel with Jefferson’s one-time toady, Aaron Burr.  This duel resulted because Hamilton was doing whatever he could to keep the amoral and unscrupulous Burr from public office (in this case, it was the governorship of New York).  When the election of 1800 resulted in a tie between Jefferson and Burr, Hamilton urged the House to vote for Jefferson, his archenemy.   Despite what had appeared in the press, Hamilton did have morals and scruples.  Unlike some.  Speaking of which, Jefferson would go on to serve 2 terms as president.  And all of that angst about Hamiltonian policies?  They all went out the window with the Louisiana Purchase (which was unconstitutional, Big Government and Big Finance).

RONALD REAGAN WAS routinely called old, senile and out of touch by the entertainment community, the media and his political foes.  But he bested Mikhail Gorbachev and the Soviet Union, something Jimmy Carter never did.  He said ‘no’ at Reykjavik because he told the American people that he wouldn’t give up the Strategic Defense Initiative (SDI).  He knew the Soviet Union was bleeding.  Communism was a farce.  It inhibited human capital.  And impoverished her people.  SDI may have been science fiction in the 1980s, but capitalism wasn’t.  It could do it all.  Including SDI.  The Soviet Union was on the ropes and Reagan would give no quarter.  The days of living in fear of the mushroom cloud were over.  And capitalism would deliver the knockout punch.

Reaganomics, of course, made this all possible.  Supply-side economics.  Which follows the Austrian school.  Say’s Law.  ‘Supply creates demand’.  You don’t stimulate the economy by taxing one group of people so another group can spend.  You stimulate it by creating incentives for risk takers to take risks.  And when they do, they create jobs.  And wealth.

Tax and spend is a failed Keynesian, zero-sum economic policy.  When you take from the earners and give to the non-earners, we just transfer purchasing power.  We don’t create it.  For some to spend more, others must spend less.  Hence, zero-sum.  The net some of goods and services people are purchasing remains the same.  Different people are just doing the purchasing.

When Apple invented the Macintosh personal computer (PC), few were demanding a PC with a graphical user interface (GUI).  But Apple was innovative.  They created something they thought the people would want.  And they did.  They took a risk.  And the Macintosh with its mouse and GUI took off.  Apple manufacturing increased and added jobs.  Retail outlets for the Macintosh expanded and created jobs.  Software firms hired more engineers to write code.  And other firms hired more people to engineer and manufacture PC accessories.  There was a net increase in jobs and wealth.  Just as Say’s Law predicts.  Supply-side economics works.

Of course, the Left hates Reagan and attacked Reaganomics with a vengeance.  They attacked Reagan for being pro-rich.  For not caring about the poor.  And they revised history.  They say the only thing the Reagan tax cuts gave us were record deficits.  Of course, what those tax cuts gave us were record tax receipts.  The government never collected more money.  The House of Representatives (who spends the money), awash in cash, just spent that money faster than the treasury collected it.  The record shows Reaganomics worked.  Lower tax rates spurred economic activity.  More activity generated more jobs and more personal wealth.  Which resulted in more people paying more taxes.  More people paying taxes at a lower rate equaled more tax revenue in the aggregate.  It works.  And it works every time people try it. 

Because Reaganomics worked and showed the Left’s policies were failures, they had to attack Reagan.  To discredit him.  They had to destroy the man.  Except when they’re running for elected office.  Then they strive to show how much more Reagan-like they are than their conservative opponents.  Because they know Reaganomics worked.  And they know that we know Reaganomics worked.

GEORGE W. BUSH was routinely called an ‘idiot’ by the entertainment community, the media and his political foes.  Yet this ‘idiot’ seems to have outwitted the elite of the liberal Left time and time again.  I mean, if their policies were winning, they would be no reason to have attacked Bush in the first place.  The Left hated him with such vitriol that they said he blew up the Twin Towers on 9/11 as a justification for invading Iraq for her oil.  It was Big Oil’s lust for profit, after all, that was driving this Texan’s Big Oil policies.  And taking Iraq’s oil would increase Big Oil’s sales and give her even more obscene profits.

If Bush was an idiot, he must have been an idiot genius to come up with a plan like that.  Then again, gasoline prices crept to $4/gallon following the Iraq War.  Had all that oil gone on the market according to plan, that wouldn’t have happened.  Unless the plan was to keep that oil OFF of the market, thus, by rules of supply and demand, the price of oil (and the gasoline we make from it) would go up thus enriching Big Oil through higher prices resulting from a lower sales volume.  My god, what evil genius.  For an idiot.  Of course, gas taxes, numerous summer gas blends (required by the government’s environmental policies), an aging and over-taxed pipeline infrastructure and insufficient refinery capacity (the government’s environmental policies make it too punishing even to consider building a new refinery) to meet increasing demand (soaring in India and China) had nothing to do with the rise in gas prices.

IS THE POLITICAL Left evil?  Probably not.  Just amoral.  They have an agenda.  They survive on political spoils and patronage.  Old time politics.  Enrich themselves through cronyism.  If tribute is paid they’ll extend favorable treatment.  If tribute is not paid, they will release their wrath via hostile regulation, litigation, Congressional investigation and punitive taxation.  Just like they did to Big Tobacco (and, no, it wasn’t about our health.  They could have just made tobacco illegal.  But they didn’t.  Why?  It just brings in way too much money to the government.  Via sin taxes.  And federal lawsuits.  And with it being addictive, it’s a frickin cash piñata for them.)

They know few agree with their philosophy.  But they don’t care.  It’s not about national prosperity.  It’s about power.  And they want it.  That’s why they can’t debate the issues.  They know they can’t win.  So they attack the messenger.  Not the message.  If you don’t believe that, you can ask Abraham Lincoln, Ronald Reagan, George W. Bush, Sarah Palin and just about any other Republican.  Well, you can’t ask Lincoln or Reagan.  But you can guess what they would say.

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