Government racketeering

WASHINGTON – The absurd, anti-libertarian smoking ban in Madison pubs and restaurants is, of course, sadly part of a larger national trend. In a column in today's Washington Post, George Will weighs in on the hypocritical difficulties of government handling of tobacco in the United States. Though his concern is more tax and tort-centric (including a marvelous pot shot at Madison County, Illinois), the piece clearly spells out some of the major issues at hand:

Philip Morris is America's largest maker of cigarettes, a product legal to use but problematic to merchandise legally. Cigarettes are stigmatized by common sense and all state governments. But because those governments are increasingly addicted to cigarette tax revenue, the governments must be careful not to make cigarettes so expensive they do not sell well.

Interestingly, the article also addresses a rather complicated issue deriving from a recent settlement between the majority of the states and tobacco companies. In short, Mr. Will notes that the settlement not only amount to veritable collusion but, disturbingly, seems to be in plain conflict with the text of the United States Constitution (no penumbras needed here).

The column does a deft job noting the government's utter hypocrisy in continually treating tobacco companies as purely evil entities and yet relishing the fruits (taxes) of their successes.

So how best to handle this conundrum? The answer may well exist in liquor stores.

Though Washington, DC is much like Madison, Wisconsin in terms of the liquor market, things are a touch different over the border in Maryland. Hard liquor is sold mainly – though not exclusively – by the county. County liquor stores are easy to spot.

And it is not a unique arrangement, either. Various other states – including, I believe, New Hampshire – restrict the sale of alcohol in one fashion or another such that the majority (or, in some cases, entirety) of purchases must be made from state-run establishments. Though the idea is clearly regulatory – it is easier to ensure that people are carded when the state is running the show – it certainly makes for an interesting monopolistic stance.

So why not expand this scam to the world of tobacco? If the states are so darn concerned about people not being responsible with tobacco such that they are taxing it to seemingly no end and suing manufacturers, why not pull it from all the gas stations, supermarkets and establishments of the like? Personally I think it would be amusing to visit a cigar shop knowing that the guy whose job it is to walk me through the humidor and discuss the subtleties of maduro versus natural wraps on Nicaraguan stogies with imported seeds and torpedo heads is a state employee.

Of course, the idea is absurd. People would rebel at the polls. Recalls would be launched. And there might even be a black market for late night sales.

But the real question to be asked is if this notion is so transparently contrary to capitalist and libertarian values alike, then why is the state meddling in tobacco in the first place? Are we not merely on a slippery slope that has come too close to actually hitting the fantastical world of state-run tobacco shops?

Mr. Will may well have the answer:

The states' ability to continue treating the tobacco industry as a "budgetary Alaska" -- the last frontier for exploitation -- depends on brisk sales of cigarettes far into the future. So all 50 states, which in 2004 reaped $12.3 billion in cigarette taxes, have an incentive to carefully calibrate these taxes so as to maximize revenue. They want high taxes, but not high enough to cause large numbers of smokers to quit the habit that is so lucrative to states.

The state governments seem to be calibrating cleverly: The adult smoking rate has not fallen much recently. So we have here a rarity -- a government success story. Of sorts.