Professor Gruber Strikes Again

According to a recent post by Scott Vorse on Brietbart’s “Big Government” website, MIT economics professor Jonathan Gruber, already in hot water for saying that “the stupidity of the American voter” was politically indispensable in getting Congress to pass the Affordable Care Act, previously had advised former NYC mayor Michael Bloomberg on tobacco tax policy.

In July 2008, Gruber wrote a report titled A Modern Economic View of Tobacco Taxation purporting to show, via a theoretical model, that selective excise taxes on cigarettes are progressive, meaning that their burden falls more heavily on high-income smokers than on those at the bottom of the income distribution. However, that conclusion, which is based on a very restrictive assumption about  how smokers trade off present and future consumption (so-called hyperbolic discounting), flies in the face of the evidence reported by almost every other economist who has studied tobacco taxes. Contrary to Gruber, their evidence indicates (1) that smoking consumption is persistent (because smokers do not reduce their purchases very much in response to tax-ridden increases in cigarette prices) and (2) that, demographically, smokers disproportionately are poor.

To his credit, Gruber also recognized in another article that high state and/or local cigarette taxes trigger cross-border shopping and the emergence of underground (“black”) markets as smokers predictably try to find lower priced alternatives. As a matter of fact, with one of the nation’s highest combined state, local, and federal tobacco tax rates, New York City is teeming with illicit tobacco products, with nearly two-thirds of cigarettes purchased in that market having been smuggled from lower-tax jurisdictions – or carrying no tax stamp at all.

Even more to the point, Eric Garner, choked to death by Daniel Pantaleo, one of New York City’s “finest,” met his unfortunate fate, not because he was black, but because he was apprehended in possession of contraband cigarettes.

The nanny state is alive and well. People like Professor Gruber think that they know better than the benighted (“stupid”) masses what is good for them. To be sure, cigarette smoking is not part of a healthy lifestyle. But one consequence of the growing socialization of healthcare in the United States is that one person’s consumption choices become everyone’s business. Michelle Obama’s attempt to control the food items available in government-school cafeterias, and the death of Eric Garner, are the most recent examples of the consequences of allowing political elites to dictate how ostensibly free Americans are permitted to conduct their own lives.

Expect today’s busybodies to make things worse unless the size and scope of the public sector are cut dramatically.

[For more on excise taxes, see Dr. Shughart’s superb, pathbreaking, and wide-ranging book, Taxing Choice: The Predatory Politics of Fiscal Discrimination.]

William F. Shughart II is Research Fellow and Senior Fellow at the Independent Institute, the J. Fish Smith Professor in Public Choice at Utah State University, past President of the Southern Economic Association, and editor of the Independent book, Taxing Choice: The Predatory Politics of Fiscal Discrimination.
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