[PEN-L:9437] Re: CDF: CHILD Act introduced (fwd)

[Wojtek Sokolowski <sokol@xxxxxxxxxxxxxxxxxx>]

At 07:36 AM 4/10/97 -0700, Max Sawicky wrote:

>Howard Chernick (Hunter) and Andy Reschovsky (Univ Wisc) did a paper
>a few years ago on the incidence of tobacco taxes which took up the
>lifetime versus annual incidence issues.  They found the tax to be
>highly regressive in either sense.  If you want the cite I'll hunt it
>down for you.  Or you could hunt down Chernick or Reschovsky.
>
>Of course, the incidence of the expenditure component of the bill
>offsets that of the tax side; how much I couldn't say.


I reply:  That is true, but we must not forget that the mean tax assessment
vs. mean expenditure aspect of the bill is different from the distribution
aspect of it.  That is, the tax is being levied from the entire
sub-population that happen to smoke, whereas the benfits (expenditures)
accrue only to the rather narrow group of the disabled children.  This is a
typical example of the "median voter" constraint to the distribution of
public goods that forms the backbone of the public good theory proposed by
Burton Weisbrod (_The Voluntary Nonprofit Sector_, Lexington: Lexington
Books, 1977).

If Weisbrod's analysis is correct, we will see the oppostion to the proposed
bill from the "median voter" because:
(i) it pits the interests of general population (smokers) against the
interests of a much more narrowly defined group (childern with disablities); and
(ii) by linking the target group that benefits from the scheme to the
specific tax assessment it makes the whole issue salient to the "median
voter";  (I think that the cost of obtaining information as to who is going
to benefit from a particular gov't program, a true weakness of the
Weisbrod's approach, is being substantially reduced by making this link
salient, and lowering that "information cost" makes the opposition a whole
lot easier).

>I agree totally on the limousine-liberal aspect of the tax component,
>but I think Teddy K is being smarter than Hatch.  If the basic idea
>of the package is bought into, which Hatch has explicitly done, than
>the revenue side is adjustable.  There's no important principle that
>the spending has to be financed by the cigarette tax.  Find a new
>revenue source (or combination of sources) and you have a modest
>but nice expansion of the gool old welfare state by the bankrupt
>requiem'ed-to-a-faretheewell social democracy.


I reply: I agree in principle.  Once the program has been established it
would be easier to find alternative sources of funding for it.  My only
concern is that, if the above analysis of the  public good and median voter
interests is correct, the bill, even if passed, will face eneromous public
opposition, if GOP and their tobacco sponsors decide to play that card.


PS. Thanx for the Chernick / Reshkovsky cite.  I'll try to find it via the
econolit database.
wojtek sokolowski
institute for policy studies
johns hopkins university
baltimore, md 21218
sokol@xxxxxxxxxxxxxxxxxx
voice: (410) 516-4056
fax:   (410) 516-8233


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