Raising taxes in a recession

Yep - I was one of the 150000 stranded by American Airlines this week. My next blog post will be entitled "Open letter to American Airlines" where I will list all the stupid things that happened to me on my flight home to Boston and how American Airlines can do better (a whole lot better) but I digress.

This is a campaign season and of course one of the things on the table for discussion is the economy where it seems the "R" word is being bandied about a lot more than usual (that would be "recession") and I am seeing the effects of a slowing economy in housing prices and food prices (also raised due to higher oil prices). By the way speaking of higher oil prices, I thought one of the criticisms of the Iraq war was that it was about oil. Well - I am not seeing any relief at the pump so count that as a failure as well.

So President Bush's response to the slowing economy is tax rebates (the "stimulus package"). Various stories (such as this one at MSNBC) note that the tax rebates are a way to give the economy a "shot in the arm". Well this hope is actually tied to a belief that assumes Americans will continue their self destructive ways and take this pittance from the Government (CNN has a story that states "Single filers with AGI below $75,000 will get rebates of as much as $600. Couples with AGI below $150,000 will receive rebates of up to $1,200." Hate to burst the bubble here but I am not going to get a check from the Government and then go out and but a new big screen TV just so the economy turns around. I am going to bank the money in case I need something really important, like food! Sure most Americans will go out and buy "stuff" but this will be short term gain if all.

So what else does the government want to do in a recession. Well here in Boston the House wants to raise taxes but on cigarettes those nasty little coffin nails. Reading the story in the Globe the reader learns:

The cigarette tax would generate an estimated $175 million and would go into effect in July if the bill becomes law. It sparked some of the sharpest exchanges during the hours-long debate on the floor of the House.

Backers said the cigarette tax would not only bring in needed revenue with the state facing a $1.3 billion budget gap, but would also sway some young people against taking up the habit -- and encourage older smokers to quit.

"Smoking kills you. It compromises your health and it kills you. It's something we have to be mindful of," said Rep. Rachel Kaprielian, D-Watertown, a supporter of the bill.

So just so we are clear - Smoking kills. We got it. But what I find really insidious is that the local (or Federal) Government does not ban this "product" instead it taxes it at an astronomical rate and hopes that younger folks won't start and older smokers will quit. Well if that happens, the expected effect of this tax (closing the $1.3 Billion budget gap) won't occur. Listen up folks, the Government wants you to smoke and they know cigarettes are addictive and that you smokers will pay through the nose to get a nicotine fix. They don't want to ban these things that "kill you". They need you to keep on puffing away to pay for their mismanagement of state and federal budgets. Remember that next time the Surgeon General or some other official is decrying the horrors of tobacco. This is a cash cow to government because non-smokers have no problem assigning higher taxes to someone else. Similar to libs like Al Gore who want you to conserve energy while he lives in a 10000 Sq Ft mansion. Don't believe me dear readers and think this is an urban legend - Check out the story on SNOPES.com.

So we have Boston raising taxes on cigarettes - I think my point on that is clear. But looking in California (story was linked on Drudge) I see that an Assemblyman in Sacramento is looking to raise taxes on beer. The online story on mercurynews.com states:

Joe Six-pack will have to pay a lot more to get his buzz on if Assemblyman Jim Beall has his way.

The San Jose Democrat on Thursday proposed raising the beer tax by $1.80 per six-pack, or 30 cents per can or bottle. The current tax is 2 cents per can. That's an increase of about 1,500 percent.

Beall said the tax would generate $2 billion a year to fund health care services, crime prevention and programs to prevent underage drinking and addiction.

"The people who use alcohol should pay for part of the cost to society, just like we've accepted that concept with tobacco," Beall said.

Here again we see someone in the government deciding to stick it to the users of this legal product (beer) to fund health care services and crime prevention. In a slowing economy here is a good idea - raise prices on something that you hope to sell more of. Does that make sense? This seems to be rather circular logic as the expectation is to prevent underage drinking and addiction. Let's be honest with the folks Assemblyman - you really want them to drink more and get addicted so the State of California gets more revenue - that is the end goal right?

Slowing economy so the Government tries to grab more money from the folks who are feeling the effects of the same slowing economy. I always thought if you wanted to sell something in an economy like this you lower the price to make it attractive to buyers. I guess that only occurs in the real world that I live in, not the one fantasized by these politicians.

Let's all have a beer and smoke to help out this economy!!!

OS