No more 'sin' taxes, please

21:18, Feb 18 2010

Cigarettes have many uses. I was gagging for a fag at last month's Al Green concert. As the organ-heavy riff of Love & Happiness brought Green's sacred sounds to the secular church of Auckland's Civic Theatre, noxious vapours rose from the crowd. A couple of durries would have masked the overpowering body odour.

Actually, several people did light up, but they were only smoking cannabis, and nobody seemed to mind. If they had been inhaling the legal drug, tobacco, there would have been a hue and cry.

Many non-smokers seem surprisingly tolerant and even partake of the odd joint, but fulminate at the merest whiff of tobacco fumes.

Now anti-smoking campaigners want ciggies banned in public places, although Prime Minister John Key says such a move would represent "nanny state" intrusiveness. But as the Government mulls over the means to fund cuts to personal rates, you can be sure so-called sin taxes will be part of the mix.

Its coalition partner, the Maori Party, is pushing for price rises, which will hurt many of its poor constituency, the same people it is promising to protect from an expected increase in GST.

The Smokefree Coalition also wants steep price rises and the price indexed to inflation.

This is often justified by the cost to the health system of treating smokers. This is, of course, poppycock. Smokers actually subsidise the health system and are treated as pariahs for their trouble.

In 1999-2000, smokers paid $950 million in excise, according to Treasury's 2001 Tax Review, and it is now more than $1.1 billion. Treatment, by comparison, is estimated at $225m.

About 70 per cent of the price of tobacco is tax. When I was a heavy smoker, I contributed $112 a week to the Government.

Today, my extra weekly tax burden is about $63. I would have to lie in a public hospital bed for five years and, even then, I would still be in healthcare credit.

Treasury is scathing about government gouging of the quarter of the population who smoke.

"Present levels of taxation appear indefensible on externality grounds, even if the social spending argument were accepted," it says.

"If excess health costs are to be selectively recovered from smokers or drinkers, savings in other areas of social spending, such as New Zealand Superannuation, should also be taken into account."

It's a good point. Smokers die younger, representing a considerable saving, while non-smokers linger on at a cost to the taxpayer.

Eric Crampton, a non-smoking senior economics lecturer at the University of Canterbury, says estimates of the cost of smoking are greatly inflated by including the cost of cigarette production.

"You cannot honestly have a net measure on the benefit side and then double-count by including the resource on the cost side. Similarly, we cannot count the healthcare costs on the cost side, if we do not include the tax revenues collected on the benefits side."

Treasury says the Ministry of Health and anti-smoking groups ignore "the long average lag between the payment of tobacco taxes and the incidence of health costs".

Crampton: "The cost-benefit analysis presented is fundamentally unsound [and] its methods seem to have been chosen with the aim of maximising the monetised costs of tobacco use and minimising the monetised value of the [enjoyment] derived by smokers from tobacco."

Pleasure is obtained by smoking, I assure you. It goes perfectly with three of life's best pastimes: eating, drinking and sex.

When the deed is done, even during it, there is nothing better than placing a crisp filter between one's lips and savouring the intoxication of a craving fulfilled.

Esquire magazine's fiction editor, Rust Hills, complained that "most advice you get about smoking and drinking comes from the wrong people. Their solution is worse than your problem."

Crampton would agree. His recommendation is to expunge the entire cost-benefit analysis from the Smokefree report, replaced with the "honest, albeit contestable, assertion that the authors know better what's good for smokers than smokers themselves".

An increase in tobacco excise is not certain but, as Treasury notes, this tax is neither efficient nor equitable. Smoking rates are higher among poorer groups and these people are unfairly punished by increases in the cost of tobacco.

Many smokers forego essential purchases to feed their addiction. An increase in GST, however, is a given. Smokers should not have to pay twice because of the perceived immorality of their addiction. We pay far more than our fair share.