Zero Job Growth & Common-sense Economics

By:  Ralph R. Reiland
09/06/2011
       
Zero Job Growth & Common-sense Economics

Politicians seem to have little trouble understanding how the basic Law of Demand works when it comes to things they want to discourage, like cigarettes — or when it comes to things they want to encourage, like education.

The Law of Demand says that price increases will generally produce lower sales, so the politicians raise the price of cigarettes via more taxation so that more people quit.

“The price of a pack of cigarettes has skyrocketed to $14.50 at some New York City stores thanks to a hefty new tax, leaving even the most nicotine-addicted buttheads considering nixing their fix,” the New York Post reported last year after an extra $1.60 state sales tax was slapped on every pack.

The $1.60 hike raised the total taxes on a single pack to $4.35 at the state level in New York. Additionally, there’s a municipal cigarette tax in the city of $1.50 a pack, producing a combined state and local tax of $5.85 a pack.
 

Politicians seem to have little trouble understanding how the basic Law of Demand works when it comes to things they want to discourage, like cigarettes — or when it comes to things they want to encourage, like education.

The Law of Demand says that price increases will generally produce lower sales, so the politicians raise the price of cigarettes via more taxation so that more people quit.

“The price of a pack of cigarettes has skyrocketed to $14.50 at some New York City stores thanks to a hefty new tax, leaving even the most nicotine-addicted buttheads considering nixing their fix,” the New York Post reported last year after an extra $1.60 state sales tax was slapped on every pack.

The $1.60 hike raised the total taxes on a single pack to $4.35 at the state level in New York. Additionally, there’s a municipal cigarette tax in the city of $1.50 a pack, producing a combined state and local tax of $5.85 a pack.

Click here to read the entire article.

Ralph R. Reiland is an associate professor of economics at Robert Morris University in Pittsburgh.

 

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