Guest Post: Economics 101 for RadioNZ, Guyon Espiner and Professors Janet Hoek and Chris Bullen

A guest post by the Taxpayers’ Union:

There was a breathlessness on RadioNZ where it displayed, yet again, its ignorance of economics. 

his time following news the excise tax on heated tobacco products – inherently less harmful than traditional smoked durries – was cut by 50 percent to reflect the fact.   If this isn’t news to you, recall the NZ First–National Coalition Agreement where “…taxing smoked products only” was included.  Or this from the May 2024 Budget Economic and Fiscal Update: “Through Coalition agreements, the Government has also committed to taxing smoked tobacco only and reforming the regulation of vaping, smokeless tobacco and oral nicotine products…”

The pleasant surprise is that it has happened.  

The Coalition government and Casey Costello are to be applauded for (a) carrying through on a policy commitment; (b) finally understanding what Arthur C. Pigou meant by taxes and subsidies and (c) for standing up to the health lobby mafioso the poor bloody taxpayer is funding via that rort called the Health Research Council.

For the benefit of Professors Hoek, Bullen and RadioNZ, excise taxes are Pigouvian taxes that create a “negative externality” or cost paid by an individual to dissuade usage.  Excise taxes are also the fiscal equivalent of blunt force trauma.  As child obesity rates in Mexico rise, its much-trumpeted sugar tax lauded by the usual suspects here, isn’t the silver bullet they claim it to be. 

Our classic local example, along with alcohol and fuel, is the tobacco excise tax that’s also subject to GST.  A tax on a tax.  From 2011 until 2020, governments hiked the price of tobacco 115 percent off the back of ‘ten excise taxes increases’ above inflation.  As a blast from the past, check this out.    

So what did increasing tobacco prices 115 percent, plain packaging and finger wagging from largely Otago University based health zealots achieve?  Not a lot.  The number of daily smokers fell by 88,000 between 2011 and 2020 at a glacial annual average of just 0.45 percent.

What we did see increase was poverty, ramraids, thefts, burglaries, assaults on shopkeepers and a blackmarket Otago academics denies exists.  No comment from them, strangely, on a major tobacco bust by Customs in May.  There are three major tobacco suppliers operating in New Zealand – illicit is already larger than one of them, and on track to take the second spot (based on empty pack litter surveys).

Following the axing off the ten scheduled tobacco excise tax hikes in 2019 (credit to NZ First and their consistency)  what did the policy do to smoking prevalence after 2020?  Surely, smoking must have soared given Professor Hoek and the Otago ‘experts’ pined for its return in 2021? 

Daily smoking collapsed.  New Zealand’s light hand regulatory approach to vaping, saw our smoking rates plummet while Australia (which, on the back of lobbying by Big Pharma protecting their (nicotine) patch) effective banned the ‘safer cigarette’) kept on the durries.  Fancy that. In the three years since 2020, 201,000 Kiwis quit daily smoking that saw prevalence fall from 11.9 percent to 6.8 percent last year.  That’s more than twice the quitters in less than a third of the time over policies advocated by Otago, Professor Bullen, Ministry of Health/HealthNZ and of course, RadioNZ. 

HealthNZ is being exposed as a Shadow Opposition who wanted to corrupt advice to dissuade a democratically elected government’s policy agenda:  It’s CEO, Maggie Apa, saying: “We need to make legislation look like the cheapest option”.  Is it no wonder there’s been leaks against the government and Chris Luxon must reform Labour’s Public Service Act to avoid the same fate of Rishi Sunak. A Prime Minister who ‘never fought “the blob” and “the blob” won.’

So, what the Coalition government is doing with a 50 percent tobacco excise cut on smokefree products is a Pigouvian subsidy.  This is intended to encourage behaviour that’ll have positive effects on others, like switching from dangerous cigarettes to less harmful smokeless products.  With moves to legalise oral nicotine pouches Casey Costello seems willing to play for all the marbles and she’ll make history for the right reasons if she does.  The only losers will be redundant academics who are now playing dirty pool for their very survival.  I mean what happens to ‘experts’ on smoking policy in a smokefree New Zealand.  Maybe they’ll move to Australia and improve the collective IQ but surely, even Grant Robertson will struggle to find them a paying role.

Or they can wake up and smell the roses because their anti-tobacco bias is not being pro health.  Being pro health, no longer means, being anti-tobacco.  

As for the rest of us we all win.  According to the NZ Health Survey and my local dairy for a pack of Rothmans Red 20s, the average daily smoker will spend $5,770 on their addiction over a year.  Getting smokers onto cheaper alternatives is not just great for health, it could unpick the poverty these so-called ‘experts’ created in their obsessive big tobacco fatwa.

For the avoidance of doubt, the Taxpayers’ Union takes money from smokers (they pay quite a lot of tax), and nicotine suppliers (ditto). But it is a tiny percentage of total income (total industry – covering nicotine, sugar, booze, and other regulated and taxed industries) amounts to less than 3 percent.  If you really think that the Taxpayers’ Union wouldn’t support a tax cut but for that small amount of funding, I have a bridge to sell you. RadioNZ will be first in line.

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