K Rudd’s tax raid on smokers is an interesting exercise in smash and grab economics. It affects traditional Labor voters more than anyone else, but is likely to be meekly accepted, or wildly acclaimed, by health and consumer groups across the country.
If he beats up on his own like this you have to wonder who is safe.
There is no justification for a price hike – apart from the fact that the government is desperately short of cash and won’t take the hard decisions to fix that.
Rudd tries to disguise that by claiming it is a health measure, but there is scant evidence that raising cigarette prices will have much of an effect on smoking.
Australia already has the most expensive cigarettes in the world. In US dollars a pack of Marlboro will set you back $17.70. Next most expensive is Norway $15.80, NZ $14.50, Ireland $13.9, and NY $12.50. Then you’re down to $10 with the average world price being a long way south of that.
We also have the fourth lowest smoking rate in the world.
Ah ha, you might say, so that proves increasing the price works. Well, not exactly.
Australia already had a low smoking rate before Kevin Rudd last hiked prices – by 20%. So excise increases may have followed habits, not the other way around.
And there seems to be little mathematical correlation between price and rates of smoking.
The countries that are in first, second and third spots for lowest rates of smoking all have cheaper cigarettes. Sweden has the lowest smoking rate and you can buy a pack there for $7.10. Iceland is next and a pack is $8.30, then the USA, where apart from New York a packet is less than $10. Canada, number 5 is $9.90. New Zealand and Norway then come next, but they are followed by Mexico, where the price is $3.20. Ireland, once the poster child for high prices, is 25th with a price per pack of $13.90 but a consumption rate about 50% higher than ours.
On these numbers it seems to be very difficult to get smoking rates below 20%, and while price might be a factor, other factors dominate.
The government is also running the line that the extra excise is needed to meet the health burden of looking after smokers, and the government quotes a figure for this of some $30 billion.
Nick Cater and Andrew Bolt both have some excellent analysis of this claim which appears to be an exaggeration of around 1,000%. The Federal Treasury estimates smokers cost the health system $318 million, and with this hike revenue to the government will be $7 billion.
The tax take is not surprising. Currently excise amounts to about a third of the cost of a cigarette, and a 25% increase should take that to around 42%.
Which means that the Commonwealth will be the biggest profiteer from this trade netting far more from the sale of a cigarette than the manufacturer, even counting the resulting health expenditure as their “cost of goods”.
We’re back to Kleptocratic government where the only justification needed for seizing money not its own is to spot a vulnerable industry with a pile of money where the government can dream up a quasi-moral justification for making an exception to the rules that apply to every other industry.
Today the tobacco industry is easy prey. A few years ago it was the mining industry and the “big polluters”, and apparently, as of the budget statement later today it will be the banking industry.
I wonder who’s next.
It would appear that Rudd & Gillard are involved in another contest. Who can tell lies best.
Gillard does appear to do it mostly to gain a vote, support, or for money.
Rudd appears to do it, because he prefers his persona to be a lie, & avoids telling anything as it actually is.
Surely no one can be so dumb as to believe that Ruddy has suddenly started worrying about our health, just when his budget is very sick.
On the other hand, just how much truth is there in this claim of smoking “RELATED” deaths. When ever you hear this type of qualification you know the figures are so rubbery that they would bounce sky high, if dropped on a hard surface.
Obviously the medical profession are a little less comfortable telling lies, than our Ruddy, so indulge in this verbal slight of hand.
Knowing this the anti smoking lobby came up with this bull dropping claim about “passive” smoking. What pile of the stuff. You’ll get more carcinogens following a public transport bus for a kilometer or so, & more soot, than from a lifetime in a house full of smokers. I wonder when Ruddy will try to tax the busses?
Comment by Hasbeen — August 2, 2013 @ 9:35 am
http://theconversation.com/tobacco-tax-rise-will-help-smokers-butt-out-for-good-16608
Comment by RussellW — August 2, 2013 @ 11:00 am
I would have thought that the plain packaging campaign should have been allowed to run its course, to see just how effective it was going to be.
Besides, the Govt has other better options for addressing budget deficits.
Like winding back negative gearing, which is costing the budget bottom line some 5 billion plus per. [And its repeal is hardly likely to cost labour votes.]
Or completely repealing all remaining health care insurance rebates, which is still hitting the taxpayer for over 3 billion plus per.
If that measure was also accompanied by means tested public health, those contemplating ditching their private health care, might choose not to.
And there is still plenty of unaffordable welfare for the rich to be wound back, to create the sizable surpluses we need going forward. The day of entitlements is over!
As for the carcinogenic buses, the sooner they are all converted to CNG the better. Even if that then meant they had to tow a small trailer, to get comparable or better ranges.
[Or should we wait until petrol/diesel hits $10.00 a litre, and as the first foreseeable consequence, the economy completely tanks?]
And better yet if the diesel engine is replaced by a vastly more efficient, super silent, gas powered ceramic fuel cells, which produce mostly water vapour as the exhaust component.
We have copious quantities of NG.
Some of our gas suppliers are on the public record saying, even with a fuel excise imposed, they would be able to supply domestic gas for 40 cents retail a cubic litre; and, a cubic litre of NG has the same calorific value as a litre of petrol!
This outcome would be further assisted if some of our gas provinces were labelled, domestic use only!
The only problem we have is a Govt. which won’t give itself permission to access our gas/oil, and indeed, the massive amounts of additional Govt. revenue it would produce just by doing so, as opposed to manifestly mindlessly, selling the family farm and the family silver!
Alan B. Goulding.
Comment by Alan B. Goulding — August 2, 2013 @ 11:54 am
Correction, >a cubic litre<, should read, a cubic metre Apologies.
Comment by Alan B. Goulding — August 2, 2013 @ 11:58 am
Kleptocracy? “Taxation is theft” is an ancient three-word slogan parroted since Murray Rothard launched anarcho-capitalism more than 80 years ago, a claim that liberty meant Mr Greed’s liberty to deprive other citizens of theirs. It’s the catch-cry of every grabber seeking to weasel out of the obligation to pay for the society on which s/he depends.
For lying, the Libs beat Rudd and Gillard by a country mile. Children overboard anyone? That’s lying about an actual event, not just a prediction that didn’t come off. Another that gets repeated daily is the one about the Libs setting the country up with a surplus. Correction: they sold the family silver. Explore privatisations by the Howard Government to pay for massive spending. (Yes, Keating was at it too, but he isn’t blathering on endlessly about the current deficit).
But the _big_ Lib lie, the one that trumps anything in Australia before it, Lib, UAP or Labor, is the campaign of blatant WMD lies directed to “justifying” a war crime – invasion of Iraq which was at war with nobody. Only the Nazis beat that one, and they rightly met the hangman at Nuremberg for it. That makes the Libs the unrivalled Australian lie champions. This should feature in Labor election ads, but Rudd’s failure (unlike Andrew Wilkie the whistleblowing spook reviled by the Libs for his honesty) to challenge Howard’s lies at the time would be embarrassing.
Comment by Dion Giles — August 2, 2013 @ 12:13 pm
Dion,
The political resurrection of Rudd has definitely disturbed the conservative side of politics, Labor might even win the next election, what went wrong?
Agree in regard to the Coalition’s record of mendacity, actually, if the Americans and our government had really believed that Iraq had WMD they would probably never have invaded the country.
Comment by RussellW — August 2, 2013 @ 4:06 pm
True, Russell, and if they had believed it they could have taken up Saddam Hussein’s open offer for a UN team to have carte blanche for inspection with nothing out of bounds. Blix urged that it be done. Howard would have known. I did, and I’m just a Joe Blow from Bendigo.
Comment by Dion Giles — August 2, 2013 @ 4:38 pm
Russell, thanks for the link, but it illustrates the problems with relying on authority. I checked out the article, and found, for example, that her claim that a 10% increase in prices led to a 4% decline was based on a report of a US study of the US tobacco market published in 1995.
I think you’ll find that much more punitive taxes have been levied on smoking since then, to the extent that no-one knows what effect a 10% hike will have.
The figures I gave for smoking rates and the price of cigarettes suggests that these figures are wrong. If they were correct, Australia would have a much lower rate of smoking than anyone else. So whatever model she is referring to doesn’t work at the moment.
It also begs the question – if you know that a hike will have that effect and you want to stop smoking, why not put the price up to a point where no-one will smoke – a carbon tax designed specifically for nicotine abatement.
If the government were serious about the cost of smoking and that the tax was for prevention they would give the whole of the money to the states, who bear most of the cost, for their health systems.
I guess the fact that you and Dion tried to turn the argument into one as to who is the worse liar is a tacit acknowledgement that this is what Rudd has done in this situation. As good an acknowledgement as I will get I suspect.
Comment by Graham — August 2, 2013 @ 9:51 pm
I think the banking tax is actually the best possible system, as long as it’s a low rate, applies to desposits and withdrawals, there are no exemptions, no paperwork for us and most importantly, it replaces *all* other taxes!
This would mean purchases and sale of tobacco, petrol or anything else would all be taxed at the same rate.
The decision to buy or not is not artifically manipulated.
It would also mean many transactions that are not currently taxed would be.
Consider that millions of dollars is transacted on the stock exchange *every* day, yet only annual capital *gains* are taxed.
Comment by Shockadelic — August 3, 2013 @ 1:11 am
I’ll open a debate on banking taxes for you Shockadelic, because here isn’t the place to have one. Although, if you think a tax on bank deposits is going to fund the country, you’re dreaming. If you want a tax that catches everything, support the GST.
Comment by Graham — August 3, 2013 @ 9:53 am
Graham,
Amazing, I agree. Income tax certainly doesn’t catch everything, the amount paid is more or less discretionary for a significant percentage of taxpayers.
Comment by RussellW — August 3, 2013 @ 12:21 pm
You brought up the banking tax, Graham.
Comment by Shockadelic — August 4, 2013 @ 12:24 am
The proposed new tax grabs are allegedly supposed to reduce the deficit?
Joe Hockey is on the public record saying the age of entitlements are over.
If one looks at those entitlements or allowable rebates and or write offs in total, one sees around a reported 300 billions worth of them PA.
Just reducing these entitlements by a mere 10% overall, would completely cancel out the entire current deficit?
Reducing them by 15%, would create a surplus sufficiently large to begin to draw down debt? (Everyone takes a very modest economic haircut.)
And all possible without hitting the smoker or the banks, or reducing current service delivery.
Further, some long overdue rationalisation on service delivery, and whose sole responsibility they were, would allow Govt. spending to be reduced by as much as 30%, and that money redirected at Govt. debt reduction; and or, infrastructure dependant economic growth!
Growing the overall non mining economy, would increase tax receipts, and further increase our ability to roll out, (snowball) even more nation building infrastructure in a win/win outcome for all Australians.
Alan B. Goulding.
Comment by Alan B. Goulding — August 5, 2013 @ 11:15 am