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63 IRET Congressional Advisory 1 (1997)

handle is hein.taxfoundation/iretcgadv0060 and id is 1 raw text is: ,;3, Cogesinal Adiory June 24, 1997 No. 63 SHAME ON THE SENATE FINANCE COMMITTEE! In a mindless search for additional tax revenues to finance increased spending on children's health care and to ease the increase in the dreadful excise tax on airlines, the Senate Finance Committee proposes to increase the cigarette excise tax by 20 cents a package. This action is additional evidence that the critically important job of writing the nation's tax laws is in the hands of technicians who either are unfamiliar with the basic economics and principles of taxation appropriate for a free society or choose not to be guided There is no le thereby. increasing th other excise, e If the latter is correct, let's Cynical Willy forget about ever having an wit, that's wht acceptable tax system, one that will help our market system to operate more effectively. We have long relied on a tax system that elicits praise or defense from no one, except perhaps from tax practitioners in the privacy of their chambers. This tax system has contributed to wasteful uses of the Nation's production resources, limited the advances in our productivity and living standards, underwritten the growth in submarginal government spending, imposed on us hundreds of billions of dollars of dead-weight losses in compliance with and administration and enforcement of incomprehensible statutes and regulations, and fostered division and rancor between highly productive and less economically capable members of our society. Somehow or other, the U.S. economy has been able to overcome this tax-imposed abuse and to progress, although clearly not to the extent it otherwise might have. The question is why our policy makers should choose to add to the tax distortions and impediments to economic efficiency and progress. Few, if any, public finance specialists, irrespective of their ideological or philosophic preferences, defend excise taxes. These taxes, are, instead cited to illustrate how taxes distort the information the market's operations provide us about the most productive uses of our labor, capital, and other production resources, induce us as a result to use those resources less productively than we otherwise would, and deprive us of some of the more valuable output we would otherwise enjoy. Good tax policy dictates that we should eliminate or at least reduce the gitimate defense fior e cigar-ette or- any xcep~tfor- the uttter-ly Sutton rattionale, to ire the money is. excise taxes in the existing tax system. There is no legitimate defense for increasing the cigarette or any other excise, except for the utterly cynical Willy Sutton rationale, to wit, that's where the money is. What defense can the Congressional tax writers advance on behalf of hiking the tax on cigarettes? What reasoning justifies increasing the tax on cigarettes in order to reduce the one on aviation? Presumably the latter isn't a tax at all but a user fee, imposed to defray the FAA's expenses in assuring proper repair and maintenance of our commercial airlines. Never mind whether that's a proper function of a government agency; assuming the user fee had been appropriately calculated in the first place, what's the justification for reducing it now? Even if the FAA's budget outlays are deemed by consensus to Institute for Research on the Economics of Taxation IRET is a non-profit, tax exempt 501(c)(3) economic policy research and educational organization devoted to informing the public about policies that will promote economic growth and efficient operation of the free market economy. 1730 K Street, N., Suite 910, Washington, D.C. 20006 Voice 202-463-1400 * Fax 202-463-6199 0 Internet www.iret.org

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