Please note that my opinions are my own, and the opinions of the anyone or any institution quoted are theirs. The opinions expressed herein do not reflect the opinion of North Carolina State University, its board of directors, the College of Management or any other college, Student Media Authority, or WKNC Raleigh.

Sunday, December 11, 2005

Smoking Bans and Tax Addiction

This article is from a work I completed recently for an ag/resource econ class. Due to nationwide academic integrity policies that vary from school to school, I must request proper citation if this text is used. Please refer to the proper handbook (MLA, APA) or your professor for information on how to correctly cite an internet journal article.


Smoking, like many other issues in contemporary politics, has become an exceedingly controversial subject whose coverage by the news media lacks any substantial positive information. Discussion of the topic appears limited to opinionated slogan-slinging, however valid they may be. A brief social and political overview with the author’s assumptions and opinions will be followed by summaries of two articles published in the popular media. Conclusive statements will be drawn from their content.

Tobacco is an interesting consumption choice. Whole books are devoted to the development and use of the plant, including its history, its medicinal properties, and the social perceptions of its use. Prior to the U.S. Surgeon General’s report Smoking and Health, published in 1964, smoking had not been observed as a potentially hazardous product, though it may have been looked down upon in Victorian times as inconsiderate and common. After the publication of Smoking and Health, the general public was made more aware of health implications of various forms of tobacco consumption. On this premise it can be assumed that the information now available factors into consumption decisions, but only recently has the public consumption of tobacco become the focus of those not making the choice themselves.

In the presence of a negative consumption externality, it has become the general practice of government to take action in order to maximize social welfare based on the information available. Noting the lack of policy initiatives in the three decades following the publication of Smoking and Health, it seems strange that the issue should become so pressing in recent years. With recent cries of the public to reduce “second-hand” smoke, it may seem surprising to some that no new reports have been issued from the Surgeon General’s office; the lack of federal funding for such studies inspires awe but is not surprising given the responsibility of local government to create and enforce policies. Where are local governments getting their information to make policy decisions? Other than Smoking and Health, few comprehensive scientific studies have been published recently. Perhaps of more import is the fact that the studies which are published never receive public attention because their results simply do not follow conventional perceptions. In fact, no studies exist which correlate the effects of smoking on the environment or on others’ health to a degree that is not laughable—an assertion whose argument is beyond the scope of this essay but whose discussion is easily accessible through the Internet.

In all fairness, the presumed externality has been addressed with the banning of smoking in certain facilities, with a per-unit tax on consumption imposed at the local and state levels of government, and with a generally successful advertisement (read: propaganda) campaign which has created a level of concern which is manifested through smoking/nonsmoking decisions of firms, institutions, and individuals. One of these measures, the per-unit tax on consumption of tobacco, has produced an interesting “political” externality unpalatable to some legislators and their constituents. “Tax addiction” is a process whereby a government attempts to eliminate an externality through tax imposition only to build the revenues into unrelated areas of the fiscal budget. In the case of smoking, tobacco tax revenues seem to be spent everywhere except ad campaigns and healthcare costs. In both of these areas the continued reduction in the smoking population would justify with reduced spending in each area in that a completely nonsmoking society would lack their necessity. Instead, funneling revenues into balancing budget shortfalls in welfare and education creates a disincentive to reduce smoking.

The article “Smoking bill attracts fire,” published in Caterer and Hotelkeeper offers some insight on how a national smoking ban in the UK might affect local business and the economy as a whole. The UK government has had trouble passing a comprehensive smoking ban due to competing lobbyist organizations attempting to charm legislators by flouting catchy phrases and conclusions drawn from faulty premises. It is thought that a miniaturized version of the bill, applying only to hotels, bars and pubs would bring about the desired change in sentiment making a “blanket” ban more palatable in years to come. Charges that the exemption of private member clubs from the bill are a “gross distortion of the market” implies that a small ban would be enough to cause patrons of community clubs to drink liquor and enjoy tobacco privately. In light of this, some pubs may opt to drop food in favor of tobacco license eligibility, creating an environment conducive to “binge drinking,” an externality notable by itself. This article lacks hard evidence or economic statistics to support the claims of lobbyists in Parliament and this is likely indicative of their attitude toward the subject—that is, it is important enough to raise a ruckus by promoting catchy slogans but not important enough to warrant serious consideration of policy implications. A decrease in the patronage of local pubs might upset the economy as the utility of smokers (and bar owners) is likely to be decreased by a greater amount relative to the small increase in utility for nonsmokers (a large percentage of whom might not have a desire to frequent said bars once they become smoke free).

“Across the pond” results are mixed. Here in the U.S., localized smoking bans have had moderate success in the Midwest. In New York and California, it seems that bans have done little more than polarize the population further among political lines. North Carolina has been hesitant to enact such bans at the state level, but things may change soon. In the article “No-smoking talk rises,” News & Observer writer Lynn Bonner presents a partially lopsided argument in favor of the bans. The article claims that most Triangle patrons would not mind a smoking ban; in fact, Alicia Barron claims that the presence of her daughter is incentive enough to not smoke. This author’s mother did not have a problem firing up a Marlboro red during dinner at the Iron Skillet and found no issue smoking inside a house with his single-lunged asthmatic sister; to each her own. Lobbyists in the Legislative Building downtown seem to agree: they emphasize that the government should not limit the ability of individuals to make their own decisions. John Ng, a restaurant manager states that such limitations on choice would be comparable to “saying you could not smoke in your own home” and that he would “pay to go somewhere else.” These two statements suggest, at least to Ng, his marginal willingness to pay for smoking where he pleases may create a market for more private-member smoke bars. Some patrons state they do not see any value in banning smoking in any bars, though to them restaurant bans are reasonable. This article also fails to report statistics and to explore consequences of a ban beyond opinion and assumption. Statistics might not matter, however, if owners believe that bans will negatively impact their businesses, creating an attitude of dependence on smoking customers.

The impact of a smoking ban in a state traditionally and still partially dependent on tobacco growth and consumption appears significant. Such bans could limit the freedom of consumers and adversely impact small businesses, which make up an ever-growing sector of the U.S. economy. Will consumers limit the time spent out-on-town when in need of a few cigarettes? It is likely, but the extent of such decisions on consumption lack statistical support. Furthermore, these consequences may entail an even larger reduction in tax revenues for states which rely on tobacco revenues to cover budget shortfalls, especially those states that continue to raise per-unit taxes on consumption by triple-digit percentage points. Both sides of the argument against second-hand smoke lack accessible and publicized scientific analyses. Until the public becomes better-informed on the topic, misinformation can only lead to mistakes in policy making and to muddled inferences of policy implications.