In modern economics (slash for the purposes of this post), price hikes have two effects:
- Discourage consumption
- Encourage consumers to seek lower-priced substitute goods
Politicians like to think they can operate in an alternate reality where the basic laws of economics don't apply. Of course, since most of their constituents also like to think they're immune from these very same laws, the pols get to act all surprised when their best laid plans invariably go to hell, but thats another story for another time. From Monday's WSJ:
Politicians in Annapolis are scratching their heads wondering what happened to all those chain smokers who were supposed to help balance Maryland's budget. Last year the legislature doubled the cigarette tax to $2 a pack to pay for expanded health-care coverage. Eight months later, cigarette sales have plunged 25% and the state is in fiscal distress again.
Amazing, all it took to get people to buy less cigarettes (not smoke less, per say), was to make cigarettes more expensive. Of course, the best laid plans of mice and men oft' go awry, all that much more often when the men in question happen to be politicians.
A few pols are pretending to be happy that 30 million fewer cigarette packs have been bought in the state so far this year. As House Majority Leader Kumar Barve put it, fewer people smoking is "a good thing." Yes, except that Maryland may be losing retail sales more than smokers. Residents of Maryland's Washington suburbs can shop in nearby Virginia, where the tax is only 30 cents a pack, and save at least $15 per carton.
And herein lies the beauty of politics: Despite the fact that Maryland's legislation was inherently flawed and doomed to fail from the very beginning, the fault lies not with the State's elected officials, but with those uncooperative bastards from the neighboring states. Rule #1 (or is it #2?) of politics: make sure you can always, ALWAYS blame the other guy (who(m)ever that may be).
While we can never be 100% certain, the sad(est?) part is that most of the brain trust that is the Maryland Legislature probably thought it was a good idea.
Funny how basic economics works.
(note: This post was started back on 8/12, its just...uh...yea took a while, deal)