The Laffer Curve Bites Ireland in the Butt

Cigarette butt, to be more specific.

All over the world, governments impose draconian taxes on tobacco, and then they wind up surprised that projected revenues don’t materialize. We’ve seen this in Bulgaria and Romania, and we’ve seen this Laffer Curve effect in Washington, DC, and Michigan.

Even the Government Accountability Office has found big Laffer Curve effects from tobacco taxation.

And now we’re seeing the same result in Ireland.

Here are some details from an Irish newspaper.

…new Department of Finance figures showing that tobacco excise tax receipts are falling dramatically short of targets, even though taxes have increased and the number of people smoking has remained constant…the latest upsurge in smuggling…is costing the state hundreds of millions in lost revenue. Criminal gangs are openly selling smuggled cigarettes on the streets of central Dublin and other cities, door to door and at fairs and markets. Counterfeit cigarettes can be brought to the Irish market at a cost of just 20 cents a pack and sold on the black market at €4.50. The average selling price of legitimate cigarettes is €9.20 a pack. …Ireland has the most expensive cigarettes in the European Union, meaning that smugglers can make big profits by offering them at cheaper prices.

I have to laugh at the part of the article that says, “receipts are falling dramatically short of targets, even though taxes have increased.”

This is what’s called the Fox Butterfield effect, when a leftist expresses puzzlement about something that’s actually common sense. Named after a former New York Times reporter, who was baffled that more people were in prison at the same time that crime rates were falling, it also shows up in tax policy when statists are surprised that tax revenues don’t automatically rise when tax rates become oppressive.

Ireland, by the way, should know better. About the only good policy left in the Emerald Isle is the low corporate tax rate. And as you can see in this video, that policy has yielded very good results.

My favorite example from that video, needless to say, is what happened during the Reagan years, when the rich paid much more to the IRS after their tax rates were slashed.

P.S. You won’t be surprised to learn that a branch of the United Nations is pushing for global taxation of tobacco. To paraphrase Douglas McArthur, “Bad ideas never die, they become global.”

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Mirror, Mirror, on the Wall, Which State Has the Highest Food Stamp Usage of All?

The food stamp program seems to be a breeding ground of waste, fraud, and abuse. Some of the horror stories I’ve shared include:

• Using food stamps to buy luxury coffee at Starbucks.
• Buying steaks and lobster with food stamps.
• The Obama Administration rewarding states that sign up more food stamp recipients.
• Proposals to make it easier to use food stamps at fast food restaurants.
• College kids scamming the program for handouts.
• New York City giving food stamps to newly released prisoners and running foreign-language ads encouraging more people to sign up for the program.
• The Octo-Mom mooching off the food stamp program.
• The Agriculture Department running radio ads to lure more people into food stamp dependency.

With stories like this, I’m surprised my head didn’t explode during this debate I did on Larry Kudlow’s show.

So exactly how bad is the food stamp program?

One way of measuring the cost of the program, both to taxpayers and to the people who get trapped in dependency, is to see what share of a state’s population is utilizing the program.

I just did a “Mirror, Mirror” post on states with the most education bureaucrats compared to teachers and got a lot of good feedback, so let’s do the same thing for food stamps.

Here’s a rather disturbing map from the Washington Post.

A couple of things stand out. I can understand Mississippi, Louisiana, and New Mexico being among the worst states because they have relatively low average incomes. And that’s sort of an excuse for Tennessee, though it’s worth noting that economically and demographically similar states such as Georgia and Alabama don’t fall into the same dependency trap.

Why such a significant handout culture?

But the state that stands out is Oregon. Based on the state’s income, there’s no reason for more than 20 percent of resident’s to be on the dole. The state does get a “high” ranking on the Moocher Index, so there’s some evidence of an entitlement mentality. And welfare handouts also are above average in the Beaver State as well.

It’s also disappointing to see that food stamp dependency has doubled since 2008 in Florida, Rhode Island, Nevada, Utah, and Idaho. Though it’s a credit to the people of Utah that they’re still in the least-dependent category. But the trend obviously is very bad.

And it’s also depressing to look at the bar chart on the right and see that spending on the program has tripled in the past 10 years. Heck, food stamps were about 70 percent of the cost of a recent Senate “farm bill.”

P.S. A local state legislator asked an official in Richmond why Virginia got such a bad score in the ranking of teachers compared to education bureaucrats. The good news, so to speak, is that Virginia is not as bad as suggested by the official numbers. According to the response sent to this lawmaker, “VDOE has determined that the data it reported on school division personnel and assignments to NCES for 2005-2006 through 2009-2010 through the US Department of Education’s EdFacts Portal were inaccurate.”

The bad news, as you can see from this table, is that there are still more edu-crats than teachers, but the ratio apparently isn’t as bad with this updated data.

As a Virginia taxpayer, I suppose I should be happy. But it’s hard to get overly excited when other states are taking positive steps to bring choice and competition to education, and the best thing I can say about the Old Dominion is that we’re not quite as infested with bureaucrats as we originally thought.

P.P.S. I guess I should give the left-wing Washington Post some credit for sharing the map on food stamp dependency. And, to be fair, the paper did reprint this remarkable chart showing how bad Obama’s record is on jobs compared to Reagan and Clinton. And the paper also printed this chart showing how the economy’s performance is way below average under Obama.

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