Way back in economics 200 there is a little analyses called the "Price Elasticity of Demand."
In short, Price Elasticity compares the percentage change in quantity demanded of a given product with respect to the percentage change in price. In more short terms, if you raise the price of tobacco 10% would you expect to see a decrease in consumption of 10%?
Well, it depends on the product. Cigarettes are addictive and are therefore highly Inelastic. This means that a consumer is not all that price sensitive.
Now, neocons are saying that the sky will fall, volcanoes will blow and that the healthcare is threatened by an ever shrinking tax revenue generator from cigarettes. They are wrong. You can see here and anywhere else on the magical internet (by simply typing in "Price Elasticity of Demand for Cigarettes" into Google) that people are not very responsive to an increase in price at 10% markup.
Here at this wonderful site, towards the bottom of the page you will find "As you will see, governments prefer to tax goods with a relatively inelastic demand, since there will be little decrease in demand by consumers when the good's price increases." They are referring to cigarettes and gasoline. The graph at the top of the page is in reference to their explanation to Price Elasticity.
Real quickly, see the X axis, the difference between Q1 and Q0 is the change in percentage of smokers. Notice how much smaller that is to the Y axis, the change in price, between Pp and Pc. Big change in price... little change in smokers. (psst... someone's lying and their name begins with ... republicans)
I know, I know... some of this stuff is dry enough to serve an olive with, but HEY... it's the deal, man! It's what happens to cigarettes when you tax them and neocons and republicans of all colors (hell, Libertarians as well) are literally blowing smoke out their asses when they say that Ballot Measure 50 will cause a decrease in cigarette smokers to the extent that the kid's health care is threatened.
Is this an argument to vote yes on 50? No it's not. I'm still undecided about it.
On one hand, I like healthcare for kids. I also hate cigarettes. I also love the thought of taxing cigarette smokers for kid's health care. In fact I love it. But I don't like the constitution messed with.
It comes down to, "do the ends justify the means?" and, "why did they put this as an amendment?" I'll answer both of those in our next post.
Same Bat Channel. Same Bat Time!
In short, Price Elasticity compares the percentage change in quantity demanded of a given product with respect to the percentage change in price. In more short terms, if you raise the price of tobacco 10% would you expect to see a decrease in consumption of 10%?
Well, it depends on the product. Cigarettes are addictive and are therefore highly Inelastic. This means that a consumer is not all that price sensitive.
Now, neocons are saying that the sky will fall, volcanoes will blow and that the healthcare is threatened by an ever shrinking tax revenue generator from cigarettes. They are wrong. You can see here and anywhere else on the magical internet (by simply typing in "Price Elasticity of Demand for Cigarettes" into Google) that people are not very responsive to an increase in price at 10% markup.
Here at this wonderful site, towards the bottom of the page you will find "As you will see, governments prefer to tax goods with a relatively inelastic demand, since there will be little decrease in demand by consumers when the good's price increases." They are referring to cigarettes and gasoline. The graph at the top of the page is in reference to their explanation to Price Elasticity.
Real quickly, see the X axis, the difference between Q1 and Q0 is the change in percentage of smokers. Notice how much smaller that is to the Y axis, the change in price, between Pp and Pc. Big change in price... little change in smokers. (psst... someone's lying and their name begins with ... republicans)
I know, I know... some of this stuff is dry enough to serve an olive with, but HEY... it's the deal, man! It's what happens to cigarettes when you tax them and neocons and republicans of all colors (hell, Libertarians as well) are literally blowing smoke out their asses when they say that Ballot Measure 50 will cause a decrease in cigarette smokers to the extent that the kid's health care is threatened.
Is this an argument to vote yes on 50? No it's not. I'm still undecided about it.
On one hand, I like healthcare for kids. I also hate cigarettes. I also love the thought of taxing cigarette smokers for kid's health care. In fact I love it. But I don't like the constitution messed with.
It comes down to, "do the ends justify the means?" and, "why did they put this as an amendment?" I'll answer both of those in our next post.
Same Bat Channel. Same Bat Time!
5 comments:
This is not a Republican, Democrat or Libertarian argument.
The question is: Do we tax smokers to pay for health care of the children and hope nobody quits smoking, thus guaranteeing future revenues.
With those smokers comes second hand smoke which will endanger the kids, but we want the vast majority of smokers to continue their filthy habit. And as these smokers of today die off prematurely, we hope like hell that today's children will pick up the habit to pay for the increasing costs of health care, and you know it will increase.
Randy Leonard wants to ban smoking near public buildings. Some want to ban smoking in private autos and homes.
Really, it would be just grand if smokers would buy the damn things and have NO place for them to exercise their right to smoke and kill themselves.
We are being asked to raise a pack by $.85. Why not raise a pack by $2.00 or even $3. Screw the smokers. Who cares as long as the money rolls in to provide health care for the children.
Hi Mike
Unfortunately, you are mistaken.
Would you say the same for abortion? Gay rights? Minimum wage? Mexicans? Tell me Mike... what political topics of conversation are exclusively tied to only being Republican and Democrat arguments?
Whenever conservatives and liberals are polarized, in the majority, on any issue... it becomes a Republican/Democrat argument.
Your question is "Do we tax smokers to pay for health care of the children and hope nobody quits smoking, thus guaranteeing future revenues."
It's easy to ignore or gloss over my question, as many conservatives do, which is "why did the republicans vote no on this when it was proposed by the house resulting it now being a vote for an amendment?"
But, unlike others, I will answer your question, leaving the Constitutional argument out of the debate.
The answer is yes. As I have already explained above the economics behind Elasticity of Demand is fundamental. There is no argument here and there is no "hoping nobody quits smoking..."
If it were so easy to get people to quit their drug of choice by simply raising the price... then we could have done that to all of the illegal drugs already, and by prevailing conservative wisdom... be free of drug users.
Ta Daaaaa!
Mike... you say, "but we want the vast majority of smokers to continue their filthy habit."
Which is simply ridiculous logic. Notice, if you read Ballot Measure 50, you would notice that the "measure will fund tobacco prevention programs, safety net clinics, rural health care...."
Basically, we want LOWER cigarette consumption, not more. It just so happens that smokers will continue being born and smokers will continue smoking. There is just no way around it.
You show your bias in your fabricated argument stating that we want more smokers. And that's just crazy talk.
... crazy talk like this, that you stated, "And as these smokers of today die off prematurely, we hope like hell that today's children will pick up the habit to pay for the increasing costs of health care, "
Stupid talk. For some reason you believe this even though you are unable to substantiate it. The economics are already built into the formula and takes into consideration the decrease in consumption.
Please read ballot measure 50 and it's fine print if you have not done so already.
The republicans not only didn't sign off on this, they claim that "we will run out of money UUUGGGGH!"
Really Mike? This is your claim... when will it happen. Come on, hit me with your best, or worst, case scenario.
Why don't you and your Bushco followers enlighten everyone about the steady decline of the demand for cigarettes and the resulting diminishing returns in total revenue generated from this tax?
I'll settle for a rough guess. 5 years? Maybe 10? 20 years? 1 year? I'm all [y]ears.
We've heard you conservatives blather on with your fearmongering, I'd be happy to see the math in your logic.
I bet you a NW 23rd Escape From NY Pizza that you can't. In fact, I'll buy a NY pizza and pint of beer for anyone who can (be the first to) supply a convincing argument to support this ludicrous statement. Let's make it a Large pizza and 2 pints of beer.
Vote Yes on 49 to save our farm lands.
... Re: 50... the jury's still out for me.
Batman, Batman, Batman! This is not about the marginal inelastic demand for the pack of cigarettes. This is about an easy way to rip off a group who have no power. Our cigarettes cost $.85 per pack less than Washington's. In order to pass this tax in the Legislature, it needs a 3/5 vote infavor. They don't have the votes.
The politicians, however, can have Oregonians vote in favor of it. After all, who really gives a s--t about people too stupid to read the side of a pack about the dangers of smoking.
You write, "If it were so easy to get people to quit their drug of choice by simply raising the price... then we could have done that to all of the illegal drugs already, and by prevailing conservative wisdom... be free of drug users." You forget, cigarettes are not an illegal drug, last time I checked
Sure some money will be spent to educate smokers. However, if price won't make them quit, who says education will stop them.
What will stop new smokers from picking up the habit will be price, more than scary talk. So, why not raise the price by $5.00. The smokers won't quit, we raise a boatload of money and make it prohibitive for young people to start.
But, it is not about that at all. It's all about another source of revenue.
Why not be straight about it. If Oregonians want healthcare for the chidren, let's vote on that and figure out a way to pay for it.
BTW, Batman, I don't smoke now, but was a two-pack a day smoker up until 11-10-91.
I can't tell you how many times and ways that I tried to quit, before that date. I then put the cost of my packs of ciggy butts in my desk drawer every day, about $4.00. Soon I had enough money to join the health club across from the downtown Marriott.
Mike, Mike, Mike... sounds kind of patronizing doesn't it Mikey? But I guess it comes with the territory when one's cup is full and floweth over with one's self.
Glad to hear you quit smoking Mike. It's a nasty, stinking gross habit. And nobody survives lung cancer, which I'm sure you're well aware of.
Mike: "This is not about the marginal inelastic demand for the pack of cigarettes."
Mike, Mike, Mike...economics is about anything and everything that has a supply curve and a demand curve. I would bet that you, of all people, should know better. So, yes, this is about the inelasticity of cigarettes. Come on Mike, let's play hardball!
This is an economics and a republican issue as much as it is a health care for kids issue.
Mike: "This is about an easy way to rip off a group who have no power. "
Wow. If you believe that 84.5¢ on a pack of cigarettes constitutes (no pun intended) a rip off... then it must be a rip off.
It is well known that republicans of all ilk dislike taxation, even regressive taxations.
Since we're inventing new definitions Mike, I'll decide to call it a rip off that you and yours want to keep health care away from kids.
Mike: "In order to pass this tax in the Legislature, it needs a 3/5 vote in favor. They don't have the votes. "
Yes Mikey, I have already pointed that out here. I think you'll find it enlightening. I did, and I even typed the damn thing myself.
Mike again: "Sure some money will be spent to educate smokers. However, if price won't make them quit, who says education will stop them."
Mike... you're a classic neocon. You spin words like there's no tomorrow. 1)This money will go to help PREVENT smokers from turning into smokers as well as help those who want to quit.
No matter how much spin doctoring you do, you cannot argue against the case that an 84.5¢ pack hike will diminish the number of smokers. The Inelasticity speaks for itself. This is irrefutable Mike. Your responses are nothing but spin.
If you want to nail me to the cross, stick to one subject and substantiate it. I'm still waiting for one of you... any of you guys to substantiate anything that comes out of your mouths.
And 2) Notice Mike, how on one hand you say, "price won't make them stop, neither will education." yet on the other hand you have said, along with every other neocon, "it's a diminishing returns thing and the amount of smokers will soon run dry as will the funds!! Run for the hills!" Mikey, you can't have it both ways. Either we run out of smokers or they don't quit... you cannot have it both ways.
Mike says some more: "What will stop new smokers from picking up the habit will be price, more than scary talk."
No it won't Mike. Go back to econ 101. The numbers and graphs don't lie.
Mike: "So, why not raise the price by $5.00. The smokers won't quit, we raise a boatload of money and make it prohibitive for young people to start."
Do you seriously think anyone will vote for a $5.00 tax on anything? MY GOD MAN! You people bitch and moan at 84.5¢ you think we're going to take you seriously at $5.00?
Come on Mike, get real! We're in the business of passing laws, not wasting people's time.
... ok, I take that last sentence back, seeing that politicians do tend to waste our time more than American Idol, but you get the main idea.
Mike: "But, it is not about that at all. It's all about another source of revenue. "
... as if health care was going to pay for itself. Come on Mike, get real, again. What do you think supports this "war on terrorism?" It's called tax revenue. Same thing that funds education, highways, road crews and cops who feel up women because they are lame pieces of sh!t.
For some reason republicans have turned "taxation" into a dirty word. Come up with a better way to fund health care for kids Mike.
Mike: "Why not be straight about it. If Oregonians want healthcare for the children, let's vote on that and figure out a way to pay for it."
Don't you get it Mike? We already tried and you republicans stopped it. Read above!!! In order to get any tax bill passed we need the republicans to join in on the 3/5 vote in the House and Senate!
But your team doesn't want health care for kids Mike!
Now why the hell is that?
PS: the Pizza Beer deal is still open to anyone who wants to take advantage of it. In fact, I'll up it to 2 pizzas and three pints of beer. ALl you have to do is back up the statement above and prove it.
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