Tuesday, December 02, 2008

Big Tobacco:"Please Tax Me More"

Word is that the tobacco lobby in Arkansas is going to come out IN FAVOR of a tax increase on smokeless tobacco. Why would they do that? The answer is very instructive in the story of how big business has shifted from being part of the "leave me alone" coalition that favored small government to a powerful force for government growth. They no longer seek a "level playing field" with a friendly business climate, but rather seek to use government to tilt the playing field in their interests at the expense of the average citizen.

The tobacco lobby is funded by the brand names, not the generic labels. The lobby knows that its consumers are mostly hooked, and that price changes will not effect total consumption much, but rather act to change brands within the product. They have come out against a sales tax increase for smokeless tobacco which would tax the premium brands relatively more, but are pushing hard for a dry-weight tax on smokeless tobacco. That way a $2.00 can of the low end stuff gets the same .50 tax increase as the $4.00 premium label. This has the effect of making the premium label relatively more attractive, since in percentage terms the price increase on it will be lower than on the generics.

This is but a small example of the kinds of angles that business lobbies play every day in the halls of government. Big business has learned that the surer route to prosperity is not pleasing customers so much as it is influencing government to enact policies that favor them.

The unintended consequence of government growth is that at some point it gets so big that businesses follow the profits and start working harder to please government than they do the consumers. Just today my company decided they would not offer the product display boxes we make for retail sale even though customers liked the boxes and were willing to pay for them. The reason? Liability issues. There are stringent standards for all products now, right down to the number of gallons of water the toilet tank in your home is permitted to hold. A small company can't afford to track all the laws, better to not offer the product and please the government regulators rather than the customers.

The problem is particularly acute here in the Natural State where in their folly our leaders think the way to prosperity is to tax all businesses more in order to gather funds to bribe outside businesses here. The new business coming in (for a while) makes headlines. The negative effect such policies have on business climate does not make headlines.

A tax and business policy group recently rated all the states for business climate. The only thing that kept Arkansas out of the bottom ten is our low wages and our relatively unfriendly laws concerning unions. Word is out that the latter is shifting as Gov. Beebe keeps his commitments to core democratic groups to the chagrin of the big business interests in the NW part of the state who shifted sides to elect him. The low wages? That's not likely to change. Not with a general business climate that scrapes the bottom ten.


Anonymous Anonymous said...

I just heard that Obama will suspend some of the red tape involved in the construction sector to speed up his FDR/Keynesian work programs.

Amazing how something that's deemed beneficial for government-run operations can't be extended to the private sector.

10:21 PM, December 02, 2008  
Blogger Mark Moore (Moderator) said...

It took George McGovern leaving politics and becoming a private business owner to convert him to small government.

4:42 AM, December 03, 2008  

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