In today’s Albuquerque Journal, Democrat Sen. Howie Morales made his case for higher taxes on tobacco and e-cigarettes. We at RGF share Gov. Martinez’s concerns about any and all tax hikes, but that’s not really the point of this post.
Rather, Morales justified his tax hike, in part, by noting that a near-doubling of the tax “means there will be thousands of fewer smokers in the future.” He went on to say that “making smoking more expensive would save the lives of 7,000 New Mexicans,” presumably by reducing demand.
The idea that artificial price increases reduce demand is a basic tenet of economics, but just a few days ago Morales’ colleague Sen. Clemente Sanchez argued in the Albuquerque Journal that raising the minimum wage would “stimulate the economy and job creation.”
So, which is it? Do government-mandated price increases reduce demand for a good (as basic economics and logic imply) or do they somehow increase demand? You can’t have it both ways Senators!
As of 2012, N.M. had the third highest cigarette smuggling rate in the country. It will be interesting to see what happens to the smuggling rate and tax revenues if the threatened huge tobacco tax increase take place: https://taxfoundation.org/cigarette-taxes-and-cigarette-smuggling-state/
I agree with Charles. Higher prices on commodities make the black market richer (remember Alcohol prohibition?) Government is not in the job of changing behavior. Most politicians do not see labor as a commodity. Rather it is a tool in the hands of powerful men and organizations.