Comment by vidyesh | Hacker News Reader

Comment by vidyesh | Hacker News Reader

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To be honest I hate this economic idea of enforcing a ban via adding tax to it. This ideology shows the lack of understanding of the disparity in income in India. The middle class and below are the most affected and they face the most brunt of all this.

The same goes with how the govt. keeps adding tax on tobacco and its products every year. Forcing people to stop smoking by not allowing them to buy despite allowing it to be sold in open market is just one way of violating ones freedom to choose. I do not support nor encourage smoking but I do not like the idea of forcing people to stop smoking by making it expensive, tobacco industry brings a lot of revenue to the govt, the govt just doesn't want to stop it so they enforce such taxes so the govt. earns the same but the intake by people is reduced. This isn't a win-win by any means. People will still die of cancer no matter how moderately they smoke. The problem isn't solved here its just reduced by probably 10% but the revenue from it is still 100%.

Dunno I am all for tobacco being expensive. Soon most poor people will no longer be able to afford them. Which is a good thing to me.

I am pretty sure a lot of people will just reduce other expenses to compensate. At least for as long as they can. That just means most of the money goes to tobacco companies instead of anything else they would have spent it on.

I think I agree with vidyesh, taxes are for money not for changing social behavior.

>I am pretty sure a lot of people will just reduce other expenses to compensate. At least for as long as they can.

We don't have to idly speculate this, the phenomenon is called elasticity of demand in economics, and not only are there good estimates of elasticity for various products, there's a rich set of ideas that have been developed around elasticity, including what happens when you tax goods of various elasticities.

I highly recommend looking into the details yourself (any intro micro economics textbook will cover it), but the upshot is that cigarettes judged to have relatively inelastic demand, which is basically what you had said. This means that a tax on the product will not reduce the equilibrium quantity consumed by very much. A corollary is that the majority of the tax burden will fall on the consumers of cigarettes. I'm not sure why you said "most of the money goes to the tobacco companies"-- with all tax levels the revenue goes to the government.

Yeah the government gets the money. I hadn't thought it out completely while I was typing and just put what popped into my head.

I did take some form of economics in school but it's not something I really had a heavy interest in but I understand how it's useful.

> To be honest I hate this economic idea of enforcing a ban via adding tax to it. This ideology shows the lack of understanding of the disparity in income in India. The middle class and below are the most affected and they face the most brunt of all this.

A ban just means everyone feels the same level of pain as the poor--so net, more pain--without the gains of tax revenue.

> The problem isn't solved here its just reduced by probably 10%

A tax is about internalizing the negative externalities. If we price in the cost of cancer (and the hyperbolic discounting of my cancer being way of in the future), and I still decide it's worth it to me, then let me smoke in exchange for funding public health initiatives that will fully offset the societal cost.

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