Wake Up and Cut the Taxes

   Ontario has a new plan to help it avoid bankruptcy. It is going to crack down on contraband cigarettes.

   The folks who run the province have announced their hope to bring in an additional $700 million in taxes by going after the underground economy, which includes the huge untaxed cigarette trade. In some parts of the province almost 50 per cent of cigarettes smoked are contraband.

   So the government plans to pour more money into enforcement to collect more taxes which will presumably help reduce the $12.5 billion budget deficit projected for fiscal 2014-15. Good luck with that, folks!

   Governments have been fighting contraband, with poor success,  since the first tax schemes were invented. Contraband trade develops when taxes are increased to the point that people can’t afford to pay them. 

   Governments and stop smoking groups insist that constantly upping tobacco taxes forces people to stop smoking. They are wrong and they refuse to accept their own statistics that show they are wrong.

   Ontario has more layers of contraband tobacco enforcement than Mama Rosa’s Mile High Lasagna. It keeps adding to them, at more and more cost. Yet the only significant reduction in contraband tobacco in the last 25 years has been through cutting tobacco taxes.

   In the early 1990s the contraband tobacco trade grew so large and so violent along the St. Lawrence River that the federal government and some provinces were forced to slash tobacco taxes. Ontario cut its cigarette excise tax by 67 per cent, Quebec by 71 per cent.

   With those cuts, legal cigarette sales increased by 50 per cent. Seizures of untaxed cigarettes plunged by more than 90 per cent. 

   So how much did cutting taxes increase the smoking rate as predicted by politicians and anti-smoking groups?

   In 1985, roughly 35 per cent of Canadians smoked. By the early 1990s when contraband flooded the country, only 30 per cent smoked. The smoking rate declined even more after the 1990s tax cut. In fact the decline was greater than in the years following 2002 when taxes were raised to previous levels and beyond.

   Today, the smoking rate among Canadians is well below 20 per cent.

   Ontario should not spend more tax dollars on police and revenue agents to stop addicted senior citizens driving away from a smoke shack with a carton of untaxed cigarettes. Higher taxes and more enforcement don’t significantly lower smoking rates. People kick the habit through education and programs designed to fight addiction.

   Ontario is two-faced when it comes to cigarettes. It is addicted to tobacco taxation. No matter how much politicians talk about a Smoke-Free Ontario, they can’t live without cigarette taxes.

   In 2011, Ontario took in $1.16 billion in tobacco taxes. The same year governments across Canada raked in $7.5 billion in tobacco taxation.

   Slowly reducing tobacco taxes will help wean governments from their addiction and prepare them for the day when no one smokes and all that tobacco revenue is gone.

   More on this subject is available in Smoke Signals: The Native Takeback of North America’s Tobacco Industry @ http://www.amazon.ca/Smoke-Signals-Takeback-Americas-Industry/dp/1459706404

See My Minden Times column - http://mindentimes.ca/?p=5649

Governments Addicted to Tobacco Money

   Mounting evidence shows that governments need radical new thinking to stop the contraband cigarette industry. The latest evidence comes from New York City where the city health department reports that the number of adult smokers has risen to 16.1 per cent from 14 per cent in the last three years. That is the highest percentage since 2007.

   Taxes on a pack of cigarettes in New York City now total close to $7. The price for a legal pack of cigarettes in the city is $10.50 to $12. Contraband packs cost about $5.

A new U.S. Tax Foundation study shows that 57 per cent of cigarettes smoked in the State of New York are contraband.

   The studies join stacks of others illustrating how contraband cigarette trafficking, one of the world’s most extensive and profitable industries, continues to foil extensive efforts to reduce smoking rates.

   Governments and anti-smoking groups refuse to accept that the most effective weapon against contraband tobacco is lowering tobacco taxes. They say that lower tobacco taxes encourage smoking. Perhaps, but no one has tested the question of whether taxes can be lowered to reduce contraband while at the same time instituting programs that will help ensure a continuing decline in smoking.

   Governments won’t reduce tobacco taxes because they are addicted to the revenue. In the U.S., federal and state taxes on tobacco bring in $35.3 billion a year. In Canada, the annual tax take is roughly $7 billion, not including sales taxes on tobacco.

   Contraband tobacco not only encourages smoking but the futile law enforcement fight against it costs huge amounts of money.

   New York City is just a recent example of the folly of high tobacco taxes. Contraband tobacco is in your neighbourhood, making it cheaper for people to smoke while building new criminal organizations. Governments need to try new approaches but addiction to the taxes and the constant shouting of narrowly focussed anti-smoking groups ties them to the same old thinking.

   More on contraband and the history of tobacco can be found in Smoke Signals: The Native Takeback of North America's Tobacco Industry. (Dundurn Press)

Tobacco to the Rescue

   Tobacco, that comforting but deadly plant that has sickened and killed so many people over five centuries, is being used to grow an experimental serum for treating Ebola.

   The serum has been given to two American aid workers being treated for Ebola in Atlanta, Georgia. They contracted the deadly virus while caring for Ebola patients in Liberia and were flown home in an effort to save their lives.

   The serum is produced by injecting a compound of antibodies into genetically modified tobacco plants. The plants then build proteins that are extracted and purified into a serum.

   It is not known yet whether the serum is completely effective in treating the virus, which kills roughly sixty per cent of people who contract it. More research will determine whether the tobacco-produced serum is a miracle drug against Ebola.

   Tobacco also might play a role in saving the environment. It is being tested as a biofuel for aircraft. Boeing and South African Airways and a company specializing in new aviation fuels are producing fuel from tobacco seed oil. Eventually they hope to be able to use entire tobacco plants to produce the fuel.

   Aviation biofuels are said to reduce carbon emissions by fifty to eighty per cent. Tobacco biofuel is nicotine free.

   All this is more evidence that tobacco is one of planet’s most intriguing plants. More on the fascinating history of the plant can be found in Smoke Signals: The Native Takeback of North America’s Tobacco Industry (Dundurn 2012).
   Also here's a link to some questions and answers about the Ebola serum:
http://www.nytimes.com/aponline/2014/08/11/health/ap-us-med-ebola-drug-qa.html?hp&action=click&pgtype=Homepage&version=WireFeed&module=pocket-region&region=pocket-region&WT.nav=pocket-region&_r=0