The More You Tax, the Less You Get

An article in USA Today notes that big tax hikes on tobacco have dramatically reduced consumption of cigarettes. This is hardly surprising. Indeed, politicians openly state that they want higher tobacco taxes to discourage smoking, and their economic analysis is correct (even if their nanny-state impulses are not).

It is frustrating, though, that the same politicians quickly forget economic analysis when the debate shifts to taxes on work, saving, investment, and entrepreneurship. But just as tobacco consumption fell when taxes rose, it is inevitable that there will be less productive activity if statists in Congress follow through on plans to hike tax rates on capital gains and corporate income:

As Congress weighs the biggest federal cigarette tax hike in history, a
USA TODAY analysis finds that higher state taxes on smokers have produced sharp declines in consumption. The amount of decline in smoking is directly tied to the size of the tax increase, the analysis shows. Cigarette sales fell 18% in North Carolina last year after the tax was raised in two steps to 35 cents from a nickel. The tobacco-growing state resisted higher cigarette taxes until 2005.

Elsewhere: Connecticut has increased its tax to $1.51 from 50 cents per pack in 2002. Since then, per capita consumption of cigarettes has fallen 37%.
New Jersey raised its tax to $2.40 from 80 cents in 2002. Smoking has dropped 35%.

…Thomas Briant, executive director of the National Association of Tobacco Outlets, agrees that consumption will fall about 6% if a $1 federal tax is imposed but says the high tax will have negative effects. State governments will suffer a sharp decline in revenue, and black-market sales and thefts will increase to avoid the draconian tax, he says.

A Lot of Kids Aren’t Alright

The WSJ editorial board looks at recent National Assessment of Educational Progress (NAEP) test scores for American students and sees a glass half full:

Pop quiz: Which has been most important in reducing poverty over time: a) taxes, b) economic growth, c) international trade, or d) government regulation?

We know what our readers would say. But lest you think American young people are slouching toward serfdom, you’ll be pleased to know that 53% of U.S. high school seniors also answered “b.” The latest version of NAEP asked this question, among others on economics, and the results will not please members of the Socialist International, or for that matter the Senate Finance Committee.

Good news, I suppose, considering that our kids are mostly taught by employees of a government monopoly. But 53% is only a bare majority.  Even if you add in the 8% of students who picked trade, you only get to 61% of students giving an answer that’s remotely plausible. 

So here’s the half-empty analysis: Some 38% of high school seniors think either that taxes or government regulation has been the most important factor in reducing poverty over time.

That’s just plain scary.  Add it to the very, very long list of reasons why we need to reform our government-mandated system of government youth indoctrination and support educational freedom through tax credits.

Conservative Big Spending Goes Global

By now it’s old hat that President Bush, who remains inexplicably popular with conservatives, is the biggest spender since LBJ. Now it turns out that the Conservative government elected two years ago in Canada is trying to match him.

John Williamson of the Canadian Taxpayers Federation notes in the National Post that “the Conservatives’ two budgets boosted spending by $24.4 billion over two years.” OK, it’s not Bush’s trillion dollars. But Canada is a smaller country, and “as a result the size of the federal government has grown by 14%.”

It looks like Patrick Basham was all too prescient when he predicted, to much consternation in Canada, that Harper would become “Bush’s new best friend.” 

Talk Radio Can’t Handle the Truth

Speaking of Casey Lartigue’s speaking truth to power, as we just were, here’s his recent Washington Post column on how he got fired from his XM radio show. He was sacked after devoting a show to exposing a conspiracy theory about government plans to undermine black leadership that has received widespread credibility in the African-American media.

Here’s hoping a more entrepreneurial station manager will see an opportunity to hire a courageous and insightful host who’s suddenly available.

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Even Public School Employees Love Education Tax Credits!

This recent Education Next/ Harvard (PEPG) survey of U.S. adults’ opinions on education issues has been out for a bit, but everyone seems to have missed some really interesting results. 

In this poll, like so many others, there is significantly more support for tax credits (53 percent) to offset private education costs than for school vouchers (45 percent), and much greater opposition to vouchers (34 percent) than to tax credits (25 percent).  That leaves a 28-point margin of support for tax credits compared to just 11 points for vouchers. 

And before you object that “the voucher label has been trashed by the unions!,” the possibly tainted word “voucher” doesn’t appear in the relevant survey question.

But that’s not all; most current/former employees of the government school system support tax credits, by a decisive margin of 22 percent!

I have to repeat that, because it just feels so flippin’ good: Most of the people who have worked for the government school system support education tax credits.

This is truly remarkable.  Even vouchers are only narrowly opposed by public school employees, by a close two-point margin. 

It is clear that using tax credits to effect school choice is much more popular and less objectionable to the general public, and even to public school employees, than are vouchers.  It is also clear that the word “voucher” appears to have relatively little to do with the tax credit advantage in public support. 

I just wish they had asked about broad-based programs, not just ones targeted to low-income families.  Polls show that the public is much more supportive of universal policies.

Education tax credits are a political win — and we in the school choice movement need to do a much better job getting politicians to see that fact.

Good News for D.C. Schools

The Washington Post reports:

D.C. Schools Chancellor Michelle A. Rhee said yesterday that most of the District’s public schools will start the academic year this month stocked with required textbooks, although more than half of the schools lack the requisite number.

Most of the schools will have textbooks when they open. Cool. A few years ago the school superintendent was boasting that most of the schools would open on time. So this is an improvement. Not only will they open, most of them will have textbooks.

My former colleague Casey Lartigue told the sad story of the D.C. government-run schools five years ago. Then-School Board president Peggy Cooper Cafritz sharply rebuked him — without pointing out any errors in the study — at a Cato Policy Forum.

A Snub for the Dying

On Tuesday, the U.S. Court of Appeals for the D.C. Circuit ruled 8-2 that terminally ill patients who have exhausted all available treatments have no constitutionally protected right to access experimental treatments not yet approved by the federal Food and Drug Administration.  A panel of the D.C. Circuit previously had ruled 2–1 in favor of the terminally ill patients who brought the case, Abigail Alliance for Better Access to Developmental Drugs v. Eschenbach

The Abigail Alliance is named for Abigail Burroughs, who died of head and neck cancer in 2001 after failed attempts to access Erbitux (cetuximab) through the FDA’s existing channels.  (In 2006, the FDA approved Erbitux for treatment of head and neck cancer.)  The Abigail Alliance now represents similarly situated, terminally ill patients who only want one last shot at life.  Eschenbach is commissioner of the FDA.

In an op-ed [$] in today’s Wall Street Journal, my colleague Roger Pilon discusses the tortured legal reasoning that led to the perverse conclusion that terminally ill patients do not have a fundamental right to save their own lives. 

The scientific and economic argument supporting the FDA’s case is that we would get far less information about drug safety and efficacy if terminally ill patients could access unapproved drugs, because there would then be no incentive for patients to participate in the clinical trials that generate such information.  There are a number of problems with this argument, the greatest being that it reduces Abigail Burroughs to a cog in some bureaucrat’s grand machine.

On September 25 from noon to 2pm, the Cato Institute will host a forum on Abigail Alliance for Better Access to Developmental Drugs v. Eschenbach.  Speakers will include Scott Ballenger, lead counsel for the Abigail Alliance; Ezekiel Emanuel, chair of the Department of Bioethics at the National Institutes of Health; and yours truly.  Keep watching Cato@Liberty or the Cato website for further details.

This week’s ruling brought to mind a quote from Mark Twain that appeared in the New York Times on February 28, 1901, and that Mike Tanner and I included in our book Healthy Competition:

The State stands a Gibraltar between me and anybody who insists upon prescribing for my soul what I don’t want to take… . Why shouldn’t I have equal liberty with regard to my body, which is of so much less concern? … Now what I contend is that my body is my own, at least I have always so regarded it. If I do harm through my experimenting with it, it is I who suffer, not the State.