Monday, November 18, 2002
National Ammo Day--No Post (Tobacco Letter)
I’m sorry that there will be no post this week. I’ve been busy with real work as well as with National Ammo Day on November 19. I’ll try to post later in the week, but definitely by next Monday.
I did have an interesting e-mail exchange. If anyone has more information on this topic (save me some research time), let me know:
Mrs. Du Toit,
I have been reading your website now for a couple of weeks, and have enjoyed your knowledge of the Federal government’s budget/tax policies. I have a question concerning Federal tax on tobacco (and alcohol).
I am anti anti-smoking, meaning that I am against the current trend to demonize the tobacco industry for selling legal products. What I would like to know is do you know (or can you tell me how to find out) how much money the Federal government takes in each year from taxing tobacco products? The reason I ask is because in all of the hype against tobacco, no one has yet to make the stand that since tobacco is so horrible, it should be banned.
The anti-smoking lobby is demonizing the tobacco industry (and maybe rightly so), but if smoking is really that bad, why not just make tobacco illegal? The answer (I think) is because the Federal government takes in too much tax money from tobacco and does not want to lose that source of revenue. So, could you tell me (or point me where to find out) how much tax money the Feds get, where the money goes, and what programs the money is spent on? Could you also help me the same for alcohol tax money?
On a side note, would you know if those states that were suing the tobacco companies for money lost to smoking related causes ever spent the money on the programs they said they were going to? I have heard that every state that received money spent that money on other programs not related to smoking/health issues.
Thanks for any info provided.
JC
Here was my response:
Very good points and a subject I will add to the list. Smoking IS bad for you (and I’m a smoker and I freely admit to that), but the "cost to society" claim is a bogus one, especially related to second-hand smoke. It is a polarization issue, one where the majority can look down their noses and point their fingers at others and claim "you cost society money by that filthy habit and so to help you, we’re going to tax you to death." Since only a minority are impacted by such a tax, the majority can claim a position of moral superiority, and they don’t object to the taxes.
The truth about those "cost to society" claims are made by adding up the medical costs of smoking. A simple problem with these extrapolations is that if smoking is killing people sooner, then they are a drain for less time, not more. What they fail to take into the account is the tax revenue FROM smoking or the tobacco industry. Your concerns about spending the money on the programs they were designed to support would have required that they set aside the money--and they don’t… all tax revenues, including sin taxes, are dumped into the General Fund, either at the Local, State, or Federal level.
There are two reasons why you cannot make tobacco illegal: 1), The tax revenues, 2), the prohibition experiment. Everyone knows that if you make smoking illegal, all you’ll really do is make it a black market product and the money will go to the bad guys and not the government (although telling them apart can be difficult).
Here’s one report from the CDC (I haven’t look at it thoroughly and I DO NOT trust CDC reports), but take a look at this (and this is at the Federal level):
Tobacco Economy
Tobacco Agriculture, 1997 Cash receipts from tobacco, $2,885,663,000
Overall tobacco manufacturing, $23,930,000,000
Excise Tax
Federal and state taxes as a percentage of retail price, 31.5%
Annual gross tax revenue, from cigarettes (federal) $7,306,959,000There is a scam afoot to begin taxing products that are "high-in-fat," using the same type of logic. There are estimates of how much fat people drain society in high medical costs, etc. What they fail to include is that people who are eating more are paying more tax already, because the more you buy, the more you are taxed. I can’t remember the source, but there was some talk of putting a tax on junk foods to offset costs.
The book "Junk Science Judo" talks about the bad science of second hand smoke and also debunks many other health claims. There is a website devoted to real science regarding this at: http://www.davehitt.com/facts/
There is some good news, however, and it was a piece of legislation that Clinton signed in his last week in office (when we was signing anything and everything). My husband wrote about it back in July. The Federal Data Quality Act.
Sorry to ramble.... I’ll see what else I can dig up on the taxation part of this.
Update: In reviewing the CDC report more carefully, some things stuck out (like a sore thumb). The report lists the "costs of smoking" in medical terms ($54B) and then uses that comparison to show how it costs more than we’re collecting in tax revenue ($7B). However, they are comparing apples to oranges. Apples are the revenue in taxes. Oranges are the costs in medicine. There is no relationship between those two amounts. It doesn’t say how much of the oranges are being paid by the apples. The report is also showing federal revenue, but not showing state and local revenue.
There is no figure that shows how much of the tax revenue is being spent on the health care for these folks. The "costs to society" claims do not include the health industry on the revenue side (which would make a good oranges to oranges comparison). The report is showing only the medical COSTS, not the insurance industry REVENUE.
Smokers pay higher premiums for insurance (life and health). Just to illustrate what I mean here: if there are 5M smokers (the estimates are that there are 35M smokers, but let’s keep it simple) and they each pay $500 more a year in health insurance (above what non-smokers pay), that is $250B right there (five times what is being spent annually on smoker’s health, even without anyone collecting a penny in tax).
So who is paying for the cost of smoking? The SMOKERS are paying for it and it appears they are paying for it five-fold.. (I need to find out the delta for smokers’ insurance rates and verify what that amount is). There doesn’t appear to be anything in the CDC report that includes the additional revenue the health insurance industry receives in higher smoker premiums, nor is there any detail of how much of those medical expenses are paid out of pocket--it gives the impression that taxpayers are footing the bill for those costs, and clearly, they are not!
The other thing that doesn’t appear to be included: it says that the tobacco industry is a $24B industry, but that’s only the industry, not the peripheral income/costs. If the industry makes $24B, and you were to remove that from the economy (somehow), the ripple effect would be staggering (all the people employed in the industry or who make a profit on the industry, suddenly removed from the tax pool). Even with a cursory review of the report, it suggests that the tobacco industry is contributing far more to the economy than is being drained from it. This is not to suggest that smoking is good for people, but that it is clearly good for the economy.
Other arguments to throw into the pot (needing investigation): According to the CDC report, smokers’ die 13 years sooner than non-smokers. This would mean that they collect Social Security for fewer years (a net economic benefit). It is estimated that 95% of a person’s health care costs occur in their last year of life (whenever that occurs). It would make sense to look at the medical costs of smoking if only people who smoked died. But we know that EVERYONE dies, it’s just when and how. I cannot see how society would benefit economically if people lived 13 years longer and spent 95% of their health care costs dying of something else.
Bottom line: don’t use an economic argument to stop people from smoking (or make people feel guilty about it as a drain on the economy). The only argument is that it is bad for you.
Monday, November 11, 2002
Linda Chavez
Thomas Sowell wrote about a new book by Linda Chavez.
Sowell’s comments about the book made it appear consistent with the purpose of this website, so I thought I’d pass it along:
I don’t know much about this lady, other than the controversy of her appointment (and withdrawal) in 2000, but if Thomas Sowell recommends her book, that’s good enough for me!
She is a regular contributor to JWR, so I think I’ll add her to my weekly reading list to learn more about her. You can find her articles on JWR at: Linda Chavez.
I’m a little behind on my reading, so I won’t order her book right away ("behind" is gross understatement), but if any of you do read it, let me know what you think of it: An Unlikely Conservative.
Sunday, November 10, 2002
Upside Down and Backwards
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Within each geographic area, we create groups of people in say, ten thousand increments. Each 10K group elects someone to represent them. Each of these representatives is intimately familiar with the people in their area and make decisions that benefit them and address their issues.
The representatives get together to vote on issues that impact the larger region. This chosen group of representatives votes amongst themselves for a couple people to represent them regionally in larger national issues--they can’t all be sent off to vote on national matters, there’d be too many of them.
This system would enable ordinary citizens to have an impact on their local issues as well as having their voices heard on issues of importance to the nation.
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Next, we decide that all tax collection occurs at the local level (within the groups of 10,000). We set rules that do not allow the larger bodies to impose taxes, except in an emergency and only for things that aren’t handled locally, because they aren’t close enough to the issues to make sound judgments and are too far away from the electorate to care what they think. All the tax revenue is collected locally and flows up to the larger bodies for things we have agreed (locally) they need to do (nationally).
We’d also agree that every person should be taxed the same amount--so if something were going to cost $10K, each person would have to pay a $1 (not some people would pay nothing and others might pay $2 or $3 because they could afford more). This will make people think about what they want to have happen, and how much it will cost, because they will have an equal burden, "I can’t vote for something I cannot afford to pay for." They wouldn’t be able to slough off a tax on someone else and allow people to vote for programs they wouldn’t be willing to support themselves. If we didn’t do this, some people would vote for things that would benefit them directly (or personally) since they’d know they wouldn’t have to pay for it. It is fair because everyone gets equal access to everything, there isn’t any reason why one person should pay or more, or pay less, for anything--and after all, we are equal, in every sense of the word.
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Now we also understand that there are national issues that aren’t local or regional, so we need a group of people to handle those issues. We decide that our local leaders should pick these people for us, since they’ll know more about them and can ride herd on these folks if they screw up. We are, in essence, picking these people because we’ve chosen the people that will pick for us. If they pick the wrong person, we’ll choose someone else to represent us. But, we’ll also need someone to be in charge of this group (you need someone to chair the meetings), but we’ll choose this person nationally, but take into account the regional differences. We’ll setup a method whereby this big leader is chosen in a plebiscite, but controlled for regions. Just to make sure these folks don’t get too high and mighty and overstep their reach, we’ll put limits on what they are allowed to do.
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We’ll also create a separate group that takes care of how laws are applied. We don’t want people in one group to decide that the members of the other group are breaking the law. This group of people wouldn’t be elected and would be appointed for life, so our leaders would be really careful about who they chose and would have to think long term.
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Finally, we’ll create a master list of things that are in the "you can’t meddle with this stuff EVER" category. This would be really important stuff--so fundamental to the principles of liberty, that we’d want to make sure these things were never messed with. This would also guarantee that if something goes terribly awry with some other group of leaders we’ve chosen, we’ll still be safe from people being able to turn us into their slaves or their complacent subjects. These things should include things like what we say, what’s in our heads (our opinions on people and issues); what we value, such as our family, our homes and property; and how punishments are carried out. And last but not least, we’d be sure to include some provision to make sure that people always have the tools available to them to handle a real abuse of power, such as a coup, by making sure that we all can shoot the bastards if they get completely out of line.
Sounds great, eh?
Yeah, it was. It was the system the Founders created for us and is known as the U.S. Constitution. Then we decided to mess with it. To see how we screwed it up, see Amendments Sixteen and Seventeen.
Monday, November 04, 2002
Rejection of Social Security Privatization Act of 2002
I was skulking around Thomas and came across this little charmer of a Bill. I remember hearing of it, but I had never read it. Just in case you don’t want to read it, basically the usual den of scum and villains were trying to head off at the pass any attempts to reform Social Security. Fortunately, nothing has happened with the Bill, except it is in Committee (Ways and Means). This, my friends, is why majority control of the House and Senate is so important.
As my husband put it, “not only are we going to put all the money in a lockbox, we’re going to put all discussion about it in a lockbox too...” I won’t quote what he said after that… I’m trying to keep this is child-friendly site, but it had something to do with parentage and fornication.
I’ve snipped out an important piece of the summary:
(10) Substituting private accounts for guaranteed Social Security benefits increases financial risk for retirees, disabled workers and their families; reduces Social Security protections for women, low-income workers, and many members of minority groups; and erodes benefits for the dependent children of workers who retire, become disabled, or die.
I love the inclusion of “women”—you know, the helpless gender who isn’t smart enough or capable of taking care of herself. Basically, they don’t give too hoots about the people who will never see any benefits from Social Security or see any reason to encourage people to save privately (keep in mind that Social Security was originally proposed as a temporary measure until people could set aside the money privately). The only goal here is to prevent people from opting for a different plan (a private one) and have made Social Security, as a method of old-age insurance, a monopoly (for all but government employees, of course, who have a separate and private plan, The Federal Pension Plan).
If Social Security is so wonderful, why don’t we propose a Bill eliminating the “opt out” option for government employees? Don’t they care about women, the disabled, and the elderly?
HR 4780 IH
107th CONGRESS
2d Session
H. R. 4780
To reject proposals to partially or completely substitute private saving accounts for the lifelong, guaranteed, inflation-protected insurance benefits provided through Social Security.
MAY 21, 2002
Mr. MATSUI (for himself, Mr. GEPHARDT, Ms. PELOSI, Mr. RANGEL, and Mrs. THURMAN) introduced the following bill; which was referred to the Committee on Ways and Means
A BILL
To reject proposals to partially or completely substitute private saving accounts for the lifelong, guaranteed, inflation-protected insurance benefits provided through Social Security.
- Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
- This Act may be cited as the `Rejection of Social Security Privatization Act of 2002.’
- The Congress finds the following:
- (1) President Bush promised to partially privatize Social Security, and appointed a commission to develop a plan on his behalf.
- (2) The commission developed three alternative plans that would partially privatize Social Security.
- (3) The plans divert substantial monies from the Social Security Trust Funds to pay for the private accounts, which threatens benefits for current beneficiaries by significantly weakening the financial condition of the Trust Funds, in direct violation of repeated assurances that current beneficiaries would not be affected by privatization of Social Security.
- (4) Plan 1 diverts Social Security revenues from the Trust Funds to fund the private accounts, which worsens the solvency of the Social Security Trust Funds by 25 percent over the next 75 years, demonstrating that privatization makes Social Security’s financing challenges more difficult rather than less, and which would require across-the-board benefit reductions of 20 percent over just the next 10 years in order to fill the gap created by the diversion.
- (5) Plans 2 and 3 also divert Social Security revenues to private accounts, and in addition substantially reduce guaranteed Social Security benefits for future retirees, as well as for disabled workers and their families, and the survivors of deceased workers.
- (6) The plans’ cuts in disability and survivor benefits directly contradict the President’s promise that disability and survivor benefits would be preserved under privatization.
- (7) Furthermore, these reductions in guaranteed benefits apply to all workers, regardless of whether they chose to have an individual account or not.
- (8) On top of these reductions in the basic Social Security benefit, all three of the President’s privatization plans impose additional reductions in Social Security benefits for those who chose to have an account, so they would not receive both their full Social Security benefit and the full proceeds from the account, as many Americans have been led to believe in the debate about privatization to date.
- (9) Independent actuarial analysis by the Social Security Chief Actuary shows the following:
- (A) Plan 1 of the President’s commission drains $1.2 trillion from the Trust Funds over the next 10 years, a revenue loss equal to 20 percent of benefit payments over the same period.
- (B) Plan 2 reduces Social Security benefits for future retirees by up to 46 percent, and drains $1.5 trillion from the Social Security Trust Funds in the next 10 years.
- (C) Plan 3 reduces benefits for future retirees by up to 30 percent, it effectively raises the retirement age, and it drains $1.3 trillion from the Social Security Trust Funds in the next 10 years.
- (10) Substituting private accounts for guaranteed Social Security benefits increases financial risk for retirees, disabled workers and their families; reduces Social Security protections for women, low-income workers, and many members of minority groups; and erodes benefits for the dependent children of workers who retire, become disabled, or die.
- (11) The President’s plans have demonstrated beyond a doubt the difficult tradeoffs inherent in privatization: cuts in guaranteed benefits; new financial risks for workers and their families; damage to the Social Security Trust Funds; and the need for massive subsidies from general revenues to cover the cost of the transition to private accounts.
- (12) Moreover, other proposals to privatize Social Security, such as the `Social Security Guarantee Plus’ plan or the `Social Security Ownership and Guarantee’ plan, establish private accounts that directly or indirectly reduce Social Security benefits through clawbacks or benefit offsets, thus placing on workers the responsibility to individually assure their own retirement income, which is the very essence and purpose of `privatization’.
- (13) Such privatization plans are not fiscally sustainable, in that they require massive resources to finance the accounts, accompanied by new Federal borrowing on an unprecedented scale. According to independent actuarial analysis--
- (A) the Social Security Guarantee Plus plan would require $3.6 trillion in new Federal subsidies over the next 40 years, which would equal $8 trillion if the funds were borrowed, and
- (B) the Social Security Ownership and Guarantee plan would require new Federal subsidies whose accumulated value would reach $20.4 trillion over the next 75 years, plus borrowing of $21.3 trillion over the same period.
- Thus, their adoption would lead to deep cutbacks in guaranteed benefits for current and future retirees, disabled workers and their families, and the survivors of deceased workers.
- (14) Therefore, these forms of privatization also do damage to the Social Security Trust Funds and undermine Social Security’s ability to pay lifelong, guaranteed, inflation-protected benefits.
- The Congress hereby commits--
- (1) to preserve the guaranteed, lifelong, inflation-protected benefits provided under title II of the Social Security Act to retirees, disabled workers and their families, and the survivors of deceased workers; and
- (2) therefore to reject--
- (A) the President’s plans to partially privatize Social Security, which would reduce the retirement security of current and future beneficiaries, and which would reduce guaranteed Social Security benefits for retirees, disabled workers, and survivors;
- (B) other proposals to privatize Social Security by establishing private accounts that would undermine traditional Social Security benefits, such as the `Social Security Guarantee Plus’ plan or the `Social Security Ownership and Guarantee’ plan; and
- (C) any and all proposals that would threaten the ability of the Social Security Trust Funds to sustain the lifelong, guaranteed, inflation-protected benefits provided under the Social Security Act today by establishing private accounts that divert resources from the Trust Funds, require fiscally unsustainable subsidies, or are integrated with Social Security benefits or financing.
END
Bill Summary
Bill Summary & Status for the 107th Congress
H.R.4780
Sponsor: Rep Matsui, Robert T.(introduced 5/21/2002)
Latest Major Action: 5/21/2002 Referred to House committee. Status: Referred to the House Committee on Ways and Means.
Title: To reject proposals to partially or completely substitute private saving accounts for the lifelong, guaranteed, inflation-protected insurance benefits provided through Social Security.
TITLE(S): (italics indicate a title for a portion of a bill)
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SHORT TITLE(S) AS INTRODUCED:
Rejection of Social Security Privatization Act of 2002 -
OFFICIAL TITLE AS INTRODUCED:
To reject proposals to partially or completely substitute private saving accounts for the lifelong, guaranteed, inflation-protected insurance benefits provided through Social Security.
| Rep Abercrombie, Neil - 9/10/2002 | Rep Ackerman, Gary L. - 7/26/2002 |
| Rep Baca, Joe - 6/27/2002 | Rep Becerra, Xavier - 10/10/2002 |
| Rep Berkley, Shelley - 7/10/2002 | Rep Berman, Howard L. - 7/17/2002 |
| Rep Bonior, David E. - 7/10/2002 | Rep Borski, Robert A. - 9/19/2002 |
| Rep Boucher, Rick - 10/10/2002 | Rep Brown, Corrine - 7/10/2002 |
| Rep Brown, Sherrod - 6/27/2002 | Rep Carson, Julia - 6/27/2002 |
| Rep Crowley, Joseph - 6/27/2002 | Rep DeLauro, Rosa L. - 9/10/2002 |
| Rep Deutsch, Peter - 9/10/2002 | Rep Dingell, John D. - 6/27/2002 |
| Rep Eshoo, Anna G. - 9/10/2002 | Rep Etheridge, Bob - 7/26/2002 |
| Rep Evans, Lane - 6/27/2002 | Rep Farr, Sam - 10/10/2002 |
| Rep Filner, Bob - 6/27/2002 | Rep Frank, Barney - 7/17/2002 |
| Rep Frost, Martin - 6/27/2002 | Rep Gephardt, Richard A. - 5/21/2002 |
| Rep Hastings, Alcee L. - 7/10/2002 | Rep Hinchey, Maurice D. - 6/27/2002 |
| Rep Hoyer, Steny H. - 10/10/2002 | Rep Israel, Steve - 10/10/2002 |
| Rep Johnson, Eddie Bernice - 6/27/2002 | Rep Kennedy, Patrick J. - 10/10/2002 |
| Rep Kildee, Dale E. - 7/17/2002 | Rep Kilpatrick, Carolyn C. - 7/10/2002 |
| Rep Kleczka, Gerald D. - 6/27/2002 | Rep Kucinich, Dennis J. - 6/27/2002 |
| Rep Langevin, James R. - 7/26/2002 | Rep Lantos, Tom - 6/27/2002 |
| Rep Larson, John B. - 6/27/2002 | Rep Levin, Sander M. - 7/10/2002 |
| Rep Lucas, Ken - 6/27/2002 | Rep Lynch, Stephen F. - 9/10/2002 |
| Rep Maloney, James H. - 9/10/2002 | Rep Markey, Edward J. - 6/27/2002 |
| Rep McCollum, Betty - 10/1/2002 | Rep McDermott, Jim - 6/27/2002 |
| Rep McKinney, Cynthia A. - 7/10/2002 | Rep McNulty, Michael R. - 9/19/2002 |
| Rep Menendez, Robert - 6/27/2002 | Rep Miller, George - 6/27/2002 |
| Rep Norton, Eleanor Holmes - 7/26/2002 | Rep Oberstar, James L. - 6/27/2002 |
| Rep Olver, John W. - 9/19/2002 | Rep Owens, Major R. - 6/27/2002 |
| Rep Pallone, Frank, Jr. - 6/27/2002 | Rep Payne, Donald M. - 7/10/2002 |
| Rep Pelosi, Nancy - 5/21/2002 | Rep Phelps, David D. - 7/17/2002 |
| Rep Pomeroy, Earl - 6/27/2002 | Rep Rangel, Charles B. - 5/21/2002 |
| Rep Rodriguez, Ciro - 6/27/2002 | Rep Roybal-Allard, Lucille - 9/19/2002 |
| Rep Rush, Bobby L. - 9/10/2002 | Rep Sanchez, Loretta - 10/1/2002 |
| Rep Sanders, Bernard - 7/26/2002 | Rep Sandlin, Max - 6/27/2002 |
| Rep Scott, Robert C. - 6/27/2002 | Rep Serrano, Jose E. - 10/10/2002 |
| Rep Sherman, Brad - 6/27/2002 | Rep Solis, Hilda L. - 6/27/2002 |
| Rep Stark, Fortney Pete - 6/27/2002 | Rep Strickland, Ted - 6/27/2002 |
| Rep Stupak, Bart - 10/10/2002 | Rep Thompson, Bennie G. - 6/27/2002 |
| Rep Thompson, Mike - 6/27/2002 | Rep Thurman, Karen L. - 5/21/2002 |
| Rep Towns, Edolphus - 9/19/2002 | Rep Waters, Maxine - 7/17/2002 |
| Rep Waxman, Henry A. - 7/26/2002 | Rep Woolsey, Lynn C. - 6/27/2002 |
| Rep Wynn, Albert Russell - 10/10/2002 |
SUMMARY AS OF:
5/21/2002--Introduced.
Rejection of Social Security Privatization Act of 2002-States that Congress hereby commits: (1) to preserve the guaranteed, lifelong, inflation-protected benefits provided under title II (Old Age, Survivors and Disability Insurance) (OASDI) of the Social Security Act (SSA) to retirees, disabled workers and their families, and the survivors of deceased workers; and (2) therefore to reject the President’s plans to partially privatize Social Security, as well as other proposals to privatize Social Security, and any and all proposals that would threaten the ability of the Social Security Trust Funds to sustain the lifelong, guaranteed, inflation-protected benefits provided under SSA.
STATUS: (color indicates Senate actions)
- 5/21/2002:
- Referred to the House Committee on Ways and Means.
Saturday, November 02, 2002
Social Security Euphemisms
From Thomas Sowell:
If I could have a single wish come true, it would be to have the pleasure of having this man at the head of my dinner table. President Bush, Dinesh D’Souza, John Lott, and Lewis Black would fill the other vacant seats. I could die happy.
