ShareThis Page
Featured Commentary

Pa. pols should be sweating over vaping tax

| Saturday, Aug. 27, 2016, 9:00 p.m.
300 dpi 3 col. x 14.25 inches/164x362 mm/558x1231 pixels Don Coker color illustration of a very nervous man, loosening his tie, clutching his stomach and sweating profusely. Columbus Ledger-Enquirer 2001
300 dpi 3 col. x 14.25 inches/164x362 mm/558x1231 pixels Don Coker color illustration of a very nervous man, loosening his tie, clutching his stomach and sweating profusely. Columbus Ledger-Enquirer 2001

In 1988, Sen. Bob Packwood asked Congress' Joint Committee on Taxation how much tax revenue the federal government would collect if it imposed a 100 percent income tax on people earning over $200,000.

The committee, wholly overlooking that people change their behavior when tax rates change, answered that such a tax would generate more than $1 trillions in revenues over five years.

But when income is taxed at 100 percent, people stop working. A 100 percent tax would not collect anywhere near $1 trillion. In fact, it would collect almost nothing. Packwood knew as much; he just wanted to point out the abject stupidity of those who would levy taxes without even considering the consequences.

In 1991, committee analysts were back at it, this time claiming that a 10 percent “luxury tax” on yachts, private planes and expensive jewelry would raise $5 million a year in additional revenues. But by the time the dust had settled, tax revenue had actually fallen by $24 million. As before, congressional analysts assumed that people would go on buying the same number of luxury items after the tax hike as they did before.

What people actually did is what any reasonable person could have predicted — they cut back on their purchases of luxury goods. In fact, consumers cut back so much that luxury goods industries laid off workers, leading to even more tax losses when the unemployed workers stopped paying income tax.

Fast forward to Oct. 1 of this year, when Pennsylvania will impose a 40 percent tax on electronic cigarettes and related products. Gov. Tom Wolf claims that the point of the tax is to increase state tax revenue. And there Wolf makes the same error that the tax committee made in 1988 and 1991.

He assumes that, in response to a whopping 40 percent tax, vapers will not alter their behavior. But every reasonable person knows they will. Vapers will simply buy their products online from out-of-state vendors. The 40 percent tax hike will raise precisely no tax revenue at all. In fact, Pennsylvania's tax revenue will decline because the 300 vape shops throughout the state will close their doors, destroying at least 300 taxpaying jobs, likely more.

We'd like to believe that our elected officials are not stupid. But in this case, stupidity is the kinder explanation. The more likely explanation is that the governor and Legislature believe they are qualified to dictate how the free citizens of Pennsylvania should live. They have decided that you should not have e-cigarettes and they are out to make it harder for you to get them. With this tax, they are expelling an entire industry from Pennsylvania because they have decided that they don't like it.

And that's the real problem. When politicians decide they are qualified to tell people how to live, what the people want no longer matters. The political class knows this is blameworthy, which is why they routinely lie to foist these rules upon us. As for the vaping tax, it will leave us with no additional tax revenue and more unemployed citizens. But the political class will have gotten what it wanted and, for them, that seems to be all that ever matters.

Antony Davies is associate professor of economics at Duquesne University. James R. Harrigan is director of academic programs at Strata in Logan, Utah.

TribLIVE commenting policy

You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.

We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.

While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.

We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers

We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.

We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.

We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.

We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.

click me