Addiction instead of taxation | Naked capitalism

By John McGregor, a translator and researcher on political violence

The Irish budget for 2023 proposes a 50% increase in the tax on a pack of cigarettes. The Irish Heart Foundation argued that the increase should have been higher to support the fight against tobacco. Australian governments have shown a similar commitment over the past 20 years to suppress smoking through tax hikes. While they have no doubt deterred some smokers, the continued application of new taxes means that a small percentage of the population, often those who can least afford them, are burdened with maintaining the tax revenues that governments rely on.

As of January 2022, excise and duty charges for a single cigarette in Australia were approximately A$1.10; The most popular pack of 40 cigarettes was priced at around AUD 65.00. The total taxes and duties account for over 75% of the final price. In February 2010, consumption and duty for a single cigarette was approximately A$0.26.

The tariff hikes have been so rapid that overall cigarette revenue has increased even as the number of smokers has fallen. This reverses the situation prior to 2010, when a Treasury Department report stated:

As mentioned above, despite this decline in the per capita smoking rate, tobacco tax revenues are relatively stable. This is because the effect of this per capita decline is largely offset by population growth and tobacco tax indexation…
In real terms, however, a decrease in tobacco tax can be observed. Finally tobacco tax as a
The share of government revenue also falls from a peak of 2.7% to 1.6% in 2008/09.

As of 2020, the tobacco tax was the fourth largest single tax collected by the federal government. This means, of course, that governments are concerned about falling smoking rates, even though that is the public goal of tax hikes.

Raising taxes on tobacco products is popular, a relatively rare, politically acceptable way for governments to increase revenue. However, a large part of their popularity stems from the fact that they disproportionately target an ever-narrowing demographic. Information on Australian smoker demographics shows that this pool is often largely made up of those who have fewer smokers.

The latest statistics show that 24.1% of the unemployed and 32.5% of the disabled smoke, compared to 14.7% of the employed (and 4.7% of students). People in remote areas (23%) smoke more often than people in big cities (12.6%). Single people with dependent children (29.9%) smoke more than twice as often as people in couples with dependent children (12.2%). Over 40% of adult Aboriginal people smoke. A higher level of formal education is associated with lower smoking rates.

In terms of socioeconomic status, 21.2% of the most disadvantaged quintile smoke, compared to 8.1% of the least disadvantaged. JobSeeker, the welfare benefit for most unemployed Australians, was recently increased to A$46.00 a day. That sum is already barely enough to live on, and the 24.1% of the unemployed who smoke will pay most of it back to the government (with a significant cut for the international tobacco companies).

The government cites declining smoking rates as a success of the plan to keep raising prices, yet the combined impact of two decades of anti-smoking campaigns has been most pronounced among the most advantaged quintiles. According to the Center for Behavioral Research in Cancer, the richest quintile fell from 16.5% in 2001 to 6.7% in 2019. The next richest quintile fell from 22% to 9.9% over the same period. The most deprived quintile increased from 26% to 20.5%.

Despite the rewarding results in terms of the total number of smokers, price increases seem unlikely to be the most effective cause of the decline when the most disadvantaged group shows the smallest change.

It turns out that the same financial burden is being placed on an increasingly smaller and less privileged group of people. Instead of seeking more revenue from multinationals, extractive industries or the rich, the government relies on a segment of the most disadvantaged for a stable income.

Australian governments have previously thrown underprivileged and addicted people under the bus for easy income. As James Boyce explained in 2019:

In the 1980s and early 1990s, state governments ran out of cash due to the elimination of various taxes (including estate and gift taxes) and the growing demand for health, education, and community services. With the exception of resource-rich Western Australia (where slots are confined to the casino), governments have turned to poker machines to fill the revenue shortfall. Slot machines were introduced in pubs and clubs not because of public pressure but despite it. In Victoria, Tasmania and South Australia, the policy change was rejected by a majority of the population. Their governments carried on anyway.

The end results of this mass gambling liberalization have, of course, been felt more strongly by socio-economically disadvantaged households. A 2017 study found the following:

Gamblers living in low-income households spent a much larger proportion of their household’s total disposable income on gambling than high-income households (10% vs. 1% on average) — even though they spent less in dollar terms ($1,662 versus $2,387). .

Troubled gamblers spent far more of their household income on gambling than other regular gamblers, with those struggling in low-income households spending an average of 27% of their disposable household income on gambling – that’s four times their annual household bills or more than half of the grocery bills for that income bracket.

Apparently, it’s not just government revenue that funds players, it’s entire segments of the sports and entertainment industry. Even within this part of the population that gambles, small subgroups gamble disproportionately. For example, 20% of poker players make 80% of their losses.

When Australia’s Labor Party came to power earlier this year, it pledged to uphold the former Liberal government’s planned tax cuts. These income tax cuts will overwhelmingly favor higher-income earners as they eliminate one tax bracket, lower another, and raise thresholds. During her tenure, the former Liberal government introduced a temporary fuel tax cut in response to the recent sharp hikes in petrol prices. Labor phased this out after six months as planned, arguing Australia could not afford to lose the revenue.

Governments continue to increase tariffs on tobacco as part of publicized plans to reduce smoking rates. However, these measures are least effective in the least favored segments of the community. Over time, these approaches tend to shift an increasing share of the revenue burden onto a smaller and more disadvantaged and dependent segment of the population. If even these plans fail, Australian governments have even shown willingness to introduce new forms of addiction, such as B. Poker machines to maintain their income without increasing corporate or income taxes.