Thursday, October 16, 2008

Democrat Copycat

Well, look what 45th TN House District candidate Democrat Andy Allman is sending out in his effort to defeat Rep. Debra Maggart (R-Sumner County) . It's the very same postcard, with the very same apostrophe error on it that Ken Wilkinson sent out against Rep. Susan Lynn (R-Sumner and Wilson Counties) which I blogged about this morning. Someone's been copying from someone else's homework. Apparently, neither one of these Democrats took a moment to have their literature proofread. You'd think with all that support the Dems get from the teacher's unions they'd have at least one English teacher friend (or fourth grader) that could have given this a once-over.

These are starting to add up. I wonder how many other Democrat candidates failed to notice this same simple error? Even sadder is the fact that the bottom of the post card incorrectly calls this legislation the "Schools First Initiative" S.B. 2326/H.B. 2354 which isn't exactly correct when the bill was titled "AN ACT to amend Tennessee Code Annotated, Title 67, Chapter 4, Part 10, relative to the taxation of cigarettes."

Here's the list of House Representatives that voted against this bill from the State's website:

Mike Bell (R), Brooks H (R), Brooks K (R), Campfield (R), Casada (R), Cobb J (R), Coley (R), Crider (R), Dean (R), DuBois (R), Dunn (R), Eldridge (R), Floyd (R), Ford (R), Gresham (R), Harrison(R), Harwell (R), Hawk (R), Hensley (R), Hill (R), Johnson C (R), Johnson P (R) , Kelsey (R), Lollar (R), Lundberg (R), Lynn (R), Maggart (R), Matheny (R), Matlock (R), McCord (R), McManus (R), Montgomery (R), Mumpower (R), Niceley (R), Rowland (R), Sargent (R), Swafford (R), Todd (R), Watson (R), Windle (D) -- 40.

Only Democrat to vote against this bill was John Mark Windle (District 41 Fentress, Morgan and Overton Counties). I knew I liked him.

Here's the language of the legislation. The red highlights the creation of an education trust fund...provided the stars and moon align correctly.

PUBLIC CHAPTER NO. 368
SENATE BILL NO. 2326
By Kyle, Marrero
Substituted for: House Bill No. 2354
By Odom
AN ACT to amend Tennessee Code Annotated, Title 67, Chapter 4, Part 10,
relative to the taxation of cigarettes.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF
TENNESSEE:

SECTION 1. Tennessee Code Annotated, Section 67-4-1004(a), is
amended by deleting the language "ten (10) mills" and by substituting instead the
language "three cents (3¢)".

SECTION 2. Tennessee Code Annotated, Section 67-4-1004, is
amended by deleting subsection (c) and substituting instead the following:

(c) Any wholesale dealers, jobbers, tobacco distributors, and retail

dealers having cigarette tax stamps, affixed and unaffixed, in their
possession on July 1, 2007, shall not be required to pay the additional
cigarette tax on such stamps resulting from the increase in the tax rate
from ten (10) mills to three cents (3¢) on cigarettes bearing such stamps.

SECTION 3. Tennessee Code Annotated, Section 67-4-1025, is
amended by adding the following language as a new subsection (d):

(d) Notwithstanding the provisions of subsections (a) and (b) of

this section to the contrary, all cigarette tax revenue generated from the increase in the tax rate from ten (10) mills to three cents (3¢) on each cigarette shall be deposited in the education trust fund created by Title 49, Chapter 3; provided that, an amount of twenty-one million dollars ($21,000,000) of such cigarette tax revenue shall be allocated to the Department of Agriculture's Tennessee agriculture enhancement program.

SECTION 4. Tennessee Code Annotated, Section 67-4-1004, is further

amended by adding the following language as a new, appropriately designated
subsection:

(d)(1) In addition to the tax provided in subsection (a), there shall

be levied an additional one-tenth of one cent (0.1¢) on each
cigarette.
(2) Any wholesale dealers, jobbers, tobacco distributors,
and retail dealers having cigarette tax stamps, affixed and
unaffixed, in their possession on July 1, 2007, shall not be
required to pay such additional cigarette tax on such stamps
resulting from the increase in the tax rate of one-tenth of one cent
(0.1¢) on cigarettes bearing such stamps.

SECTION 5. Tennessee Code Annotated, Section 67-4-1025, is

amended by adding the following language as a new subsection (e):

(e) Notwithstanding the provisions of subsections (a) and (b) of

this section to the contrary, all cigarette tax revenue generated from the
additional tax rate of one-tenth of one cent (0.1¢) on each cigarette
imposed by § 67-4-1004(d) shall be deposited in the trauma system fund
created by the "Trauma Center Funding Act of 2007" (Senate Bill
1503/House Bill 1613). Such funds shall be distributed as required by
such law.

SECTION 6. This act shall take effect on July 1, 2007, the public welfare

requiring it.
PASSED: June 4, 2007

13 comments:

N.S. Allen said...

Grammar nitpicking aside (far be it from me to defend the equally indefensible realms of state politicians and poor grammar), I like the idea of the tax on cigarettes. It's a smart tax. It settles the tax burden on a good that is far from a necessity, the demand for which is relatively inelastic. That way, you get about as much revenue as you'd expect, and the only people who face the additional, financial burden are the ones who insist on buying expensive things that they don't need.

I expect we fervently disagree on the issue of whether we ought to be increasing taxation to help fund our school system, but, if we're going to, is there a much better way to do it?

Kay Brooks said...

Government and non-government orgs are working to reduce the use of cigarettes. Cigarette smoking is down. Cigarette sales are down. Tennessee is surrounded by 8 other states which gives addicts a choice of where to find cigs cheaper. How smart is it then, to rely on a tax on cigarettes for the regular expense of public education? Not smart at all.

Throw in the fact that the Bredesen administration and his partners in the Tn House do not fund education first to ensure it has all the money they say it needs. They fund it last and then whine about not having enough 'for the children'.

I'm all for sin taxes but no one should build a budget around them.

N.S. Allen said...

Obviously, whenever you tax a good, the amount of that good that is bought decreases somewhat. However, the size of that decrease is different for different products. Demand for cigarettes, as I said above, is relatively inelastic - that is, when the price of cigarettes goes up, the amount of cigarettes demanded decreases by less than the price increases.

So, the answer to whether or not this tax would make so many people stop smoking that it wouldn't be viable is almost certainly no. Some people will quit because of the increased price, but it won't be that significant of a number.

(And, of course, a little under a quarter of TN adults still smoke. That's a nice chunk of the population.)

Now, as you also said, TN is surrounded by a lot of other states, and the tax may cause some of them to cross state lines to buy their smokes. The real question, though, is whether that will be a large enough number of smokers that the revenue we can expect from the cigarette tax will decrease too greatly.

We'd need a study on similar situations elsewhere to come to a reasonably certain conclusion, of course, but I'd feel safe wagering that the answer is no, here, too. If I drive across state lines to get cigarettes, I have to add the extra cost of gas to my expenses, not to mention factor in the travel time that could have been saved by going to the nearest discount tobacco. If I order online, I have to pay shipping - and ordering online is hardly convenient, if I suddenly find that I'm out of cigarettes.

I think it's safer to bet that the number of smokers who buy out of state wouldn't increase too dramatically.

Eric said...

"...when the price of cigarettes goes up, the amount of cigarettes demanded decreases by less than the price increases."

Well, I guess that's a safe bet when the state increases the tax 210%. Pretty hard to have less than zero taxpayers.

However, tax up 210%, revenue down. Lower revenue not spent on education as promised. More increased taxes and lies are the result.

N.S. Allen said...

You're falsely conflating a percent increase in the tax itself and the actual increase in the price of cigarettes. The first has absolutely nothing to do with the behavior of consumers; the second is a major factor in it.

Increasing the tax, as such, does not necessarily decrease revenue, because the increase in money that each customer is paying can be greater than the decrease in money that results from some customers no longer buying the product.

This is where something called "elasticity of demand" comes in. If demand for a good is relatively elastic, then, when I increase the price of that good, the number of people willing to buy drops so much that I lose money, even with the price increase. Alternatively, if demand for a good is inelastic, the number of people who stop buying has less of an effect than the price increase itself, and I make more money.

Demand for cigarettes is famously inelastic. Hence, when you increase the price on cigarettes via a tax on the buyer, the revenue you get from the tax is increased.

(This is easier to show with a graph than in words. I'll see about digging up a relevant supply and demand graph on Google, later on. No time, now.)

N.S. Allen said...

So, I promised pictures, and now I have them. Since it occurred to me that people might not have even seen the graphs involved, before, and since most web pages I could find only dealt with one little lesson at a time, I just drew some of my own and added explanations of each one.

Here they are.

Hopefully this will make everything clear.

Sir Tony Kakko said...

I hate cigarette smoke. If I see someone smoking, I assume they are on fire, and will take the proper measures to put them out.

Eric said...

Call it whatever you want:

"Tobacco tax collections were $27,319,827, an increase of $6,713,803 or 32.6 percent over the collection of September 2007."

http://www.tennessee.gov/revenue/newsreleases/monthlycollections/2008/news0908.html

Not quite the 210% increase in revenue the tax imposed. This represents almost a 40% reduction in purchases of cigarettes since the tax increase (assuming monthly demand similar year to year and no smoker population growth and that the same liars who said this money would go to education are truthful about tax revenue).

It also does not include the "cost" of the unconstitutional interstate commerce regulation the dept. of revenue is engaging in trying to tax that missing 40% of sales in other states by stealing their smokes and cars, so are they increasing tax revenue at all?

FURTHER, this revenue is not going to education as famously, repeatedly promised "for the children". If the new tax is not spent as originally sold, then revenue absolutely is not increased - elasticity or no.

N.S. Allen said...

1. Okay, you know that part of the quote that you posted that says, "an increase of $6,713,803 or 32.6%?"

That's an increase in revenue. When a tax brings in more revenue than it did before, that's called an increase.

The funny thing is, though, that, according to everything I can find, the increased sales tax on tobacco took effect on July 1st, 2007. That means that Sep. 2007's tobacco tax revenue included the additional tax. In Sep. 2007, tobacco tax revenue was up 103.6%, over the previous year.

Likewise, if you look at the months of 2008 before July, so that the months in 2007 that they're being compared to occurred prior to the new tax, you'll see that revenue increased, going from January to June in chronological order, by 184.5% (Jan.), 161.1% (Feb.), 47% (March), 41.8% (April), 212.1% (May), and 113% (June).

Now, obviously, those figures fluctuate pretty wildly. And I couldn't tell you why we had a 212.1% increase over May 2007 and a 47% increase over March 2007. But for 2/3 of those months, you had a boom in tobacco tax revenue of well over 100%. Every single month, you had an increase in revenue.

Certainly, that's not a 210% increase in revenue, but that's because the 210% figure is, as I said above, economically meaningless.

2. It's theoretically possible that the expense of arresting a few people for violating state law is greater than the millions in additional revenue that the tax increase has brought in. However, that seems intuitively unlikely, especially since those convicted of said violation will be paying the state a fine. There's no reason to believe that this is the case, simply because you say that it might be.

Still, if you happen across statistics that show that the increased cost of enforcement is greater than the increase in revenue, please share them.

3. Words mean things. An "increase in revenue" has absolutely nothing to do with how the revenue is spent. The TN government could spend all of its new tax revenue on dancing panda bears and motorcycling pigs, and we'd all agree that that's an awful use of money and not how the tax was presented to us. But revenue still increased, either way.

This isn't even an issue of economics, at this point. It's just that you don't seem to grasp what "increase in revenue" means.

Eric said...

I grasp what it means. An increase in party bunker revenue is not an increase in education revenue.

Your initial statement that raising taxes doesn't necessarily mean a loss of revenue holds true. Especially as long as you don't look at the whole picture.

For instance, look into how cigarettes are taxed, purchase of tax stamps by distributors, then tax revenue realized later when the smokes are actually sold or tax is remitted (the following month). This mostly explains the wild fluctuations as they made mass purchases of tax stamps just prior to the 210% increase. This increase was in effect July 1, 2007. I am sure you noticed that the state, for some strange reason, didn't report the tobacco tax revenue for July 2007 like they did for all the other months. Wonder why?

If the tax increase were not so ridiculously high, the state would not have to expend man hours, vehicle & fuel costs trolling our borders, surveillance costs, booking, towing, court, contraband storage & disposal, auction or sale of contraband/vehicles, correctional facilities, etc. all on an unconstitutional effort to regulate interstate commerce. All of these costs are new and are a direct expense against the tobacco revenue "increase". There are also other hidden costs such as out of state purchases of tobacco (you know not all those 40% quit from last September) and lost gasoline and sales tax revenue that are purchased at the same time the missing 40% of cigarettes are. Then there are intangibles that cannot be measured such as what new residents or businesses have we turned away with our Buford T. Justice law enforcement activity? I mean did we really need any more help looking like Roscoe and Boss Hogg here in Tennessee Waltz country?

Of course, you can't find these cost figures. I am sure the governor and Farr would be just as forthcoming with them as they have the party bunker numbers. Call it an increase in gross cigarette tax revenue if you want, but the fact is we don't know if there is a net revenue increase or not.

N.S. Allen said...

1. Again, though, my point from the very beginning was that a tax on tobacco was an economically smart way of raising revenue. Whether that new revenue becomes funding for education or for an Official State Disco Palace, the method of raising it was just as effective.

2. Look, I'll admit that I'm not able to account for all the factors, here. I'm not an economist, I don't have access to all the statistics, and I'm not omniscient. As such, laying out absolute proof of a net revenue increase is above my paygrade.

But I'm looking at the evidence that we have and making the most informed conclusion that I can from it. If statistics came out that said that the tax was actually costing the state money, I'd be all too happy to reverse my opinion. But those statistics, to my knowledge, do not exist, and, so, I base my opinion on the things that I know - that basic, economic principle suggests that a tax like this should raise revenue, that tobacco tax revenue has boomed since the tax increase and that, to my knowledge, no reports of disproportionate, resultant costs have wormed their way out of the woodwork.

Your opinion, on the other hand, seems to be based, at best, entirely on hopeful hypotheticals. Enforcement might be costing us too much, but you don't know that. We might be losing too much in gas tax revenues from across-the-border smoke-shoppers, but you don't know that. I expect that, if you tried hard enough, you could imagine up a million hypothetical reasons why the tax is actually not working. But none of them are based on evidence.

Now, that's fine. If you want to base your opinion on something that serious on hypotheticals, rather than on evidence, that's up to you. I just know that, if I tried to put arguments like those in a paper for school, I'd be laughed out of the classroom and fail the course, to boot.

And the topic of what our state government ought to and ought not to do is a tad more important than a paper for class.

Eric said...

"...in a paper for school,"

Suddenly, that explains a lot.

Kay Brooks said...

Eric wrote: "...in a paper for school," Suddenly, that explains a lot.

Yes, N.S. Allen, has indicted he's in college out of state. I'm sorry you missed that. It's one of the reasons I don't engage him in debate. I've posted he needs to get a job, a wife, a mortgage and a few kids before he'll really begin to understand how the world actually works. It's nearly all theory for him at this point.