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Even Bad Tax Policy Should Have Sanity

As I wrote for today,

I do not believe the government should use taxes as a way of changing behavior.

But until we convince the politicians to stop using the tax code to try and tinker with our choices, they should at least tinker rationally. As you could imagine, they don’t always do so.

… most tobacco taxes fail to differentiate between the different risks of different tobacco products. Cigarettes and smokeless tobacco, or snus, present very different risks. Burning and inhaling tobacco is what makes it so extremely dangerous. The use of smokeless tobacco, while not 100% safe, comes nowhere near the risk. That is because it is not burned and not inhaled. Therefore, it doesn’t come with the major risks of heart disease, lung cancer, and systemic illnesses caused by smoking.

Yet cigarettes and snus are taxed at about the same rate, even though their risks are vastly different. It is like taxing a 64 ounce serving of soda about the same as a 12 ounces. This is where Indiana caught up with the science and changed their tobacco tax rate. They encoded in law their finding that “the tax rate on smokeless tobacco should reflect the relative risk between such products and cigarettes.”

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