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Originally Posted by mcsluggo
you don't neccessarily tax something because it is unhealthy... but you DO tax something if the market price of the good fails to capture the total "societal cost" of the good.
Smoking fits this criteria, both through 2nd-hand smoke and because, like it or not, our healthcare system has a large component that is subsidized or downright supplied by the government (medicaire, if nothing else), this means that a portion the COSTS of smoking is not born by the person consuming the good, so economic efficiency is best attained by adding an extra task to the good to force the individual to bear a larger portion of the true cost (and also the revenues from the tax can be used to defray those additional costs).
in the second case: ideally, rather than increase taxes on the gulf oil co.'s, the government should open the bids on the use of the plots to much wider and more transparent bidding (rather than the sweetheart deals that are now doled out). Unfortunately, the govt has already given away many of the concessioons for long term use rights. YOu are right, paying less for something, and then selling it for more is the nature of business, but in most cases the business have created value-added for the the product and THAT is why they are able to sell it for more (either by refining it, or transporting it, or marketing it, or whatever). In the case of the gulf gas firms, they do add value (they get the oil out of the ground, and move it somewhere so it can be refined). However, a LARGE portion of the value of the product was already there, the inherent value of the oil, and it is the property of all of us as owners of the public lands. THe firms usually don't pay the market value for the extraction rights on the public property. As such a "second-best" alternative, in order to capture part of the inherrent value that the concessions have (without the value-added that the firms eventually bring) is to tax them.
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Or you don't let smokers use Medicaid / Medicare for conditions even remotely related to smoking. Seems easy enough to me. Everybody knows that smoking is bad for you these days. No one can claim ignorance.
If you really want to achieve economic efficiency, you gotta make it extremely hard to get anything free from the government. If you're taxing people with the sole purpose of charging them for what they're getting for "free," then you're just introducing administrative overhead into the mix.