By DAVID MOON, Moon Capital Management
In the last few years, the state of Tennessee has instituted
pretty significant tax increases, but chances are you aren't paying them, and
neither am I.
From a personal, selfish standpoint,
those are the kinds of taxes I like.
Consider, for instance, the recent
increase in the tax on cigarettes.
Studies suggest that 25.7 percent of
Tennesseans smoke, and lower-income and less educated people are more likely to
smoke than others. These are also the same people who are likely to buy lottery
If you're reading this column, my
guess is that you are neither among the poorest or least-educated of our
So congratulations. The
additional 42 cents per pack cigarette tax and the $1 billion a year in
Tennessee lottery revenues probably don't come out of your pocket, yet your kids
may be getting college scholarships and your local system may get more state
is rolling over in his grave.
Philosophically, these taxes have at
least one appealing characteristic. They are completely voluntary. I don't pay
these taxes because I've never bought either a cigarette or a lottery
Some legislators want a portion of
the new cigarette tax revenue to be used to allow for a reduction in the sales
tax on food items. That would be a double winner for me. I buy a ton of
Although Tennessee's new cigarette
tax is relatively low compared to the rest of the country, tobacco is one of the
highest-taxed retail products. Money is a powerful motivator, but not as
powerful as nicotine. Increasing taxes on smoking and gambling is
When you tax something, you tend to
get less of it, as long as people are acting rationally. But it's the irrational
folks who already spend money they can't afford on cigarettes and gambling.
Will it impact their behavior if
those habits are a little more expensive?
prediction: very, very little, if at all.
Talk to a psychologist, minister or
parent of an adult child. Changing behavior is difficult and complicated. If
fiscal policy could do it, then we ought to tax child abuse and larceny.
I don't mind benefiting from the
largess of the people who pay these voluntary taxes. God knows that I already
pay a lot more to the state than I receive in benefits, so this is a nice
To me, this sort of system works
just fine ' unless they decide to tax my bad habits.
David Moon is president of Moon Capital Management, a
Knoxville-based investment management firm. This article
originally appeared in the News Sentinel (Knoxville, TN).