Ob Populus

Whose coffers will the cigarette tax hike fill?

In Uncategorized on July 23, 2016 at 9:52 am

If history is any lesson, it will not be the state of Pennsylvania.

As has been reported, the state of Pennsylvania increased its cigarette tax by a dollar a pack, making it the tenth highest tax among the states. In Philadelphia, when local tax is figured in, it is the third highest city trailing  only Chicago and New York City. The obvious goal is to increase revenue for the government along with the (hopeful) added benefit of making people less reliable on cigarettes and decrease consumption.

If experience is any indicator, someone will be putting more money in their pocket; but it won’t be the tax collector.

States and cities that have raised their cigarette tax to the top of the rung have generally been disappointed with the results. Tax receipts never measured up to expectations and it wasn’t because people all a sudden stopped smoking. The buying public went to an alternative market and who usually profits from such an arrangement should give legislators pause before raising taxes on such “sin’ products.

About a decade or so ago, NYC hiked up its cigarette tax to where a pack of cigarettes went for fifteen dollars a pack. Revenue receipts did not fall in line with expectations and the reason was simple, a black market filled the void. Why spend fifteen, when the guy on the corner is offering the same product for five? And therein lays the problem when government tries to balance its books on people’s habits, people look for and find alternate solutions. So who is pocketing this extra coin? As one should expect, it is not the most savory of characters.

 

Of course, the traditional mob has its fingers in the pie. For the longest time they have made a buck on government get rich schemes. Just look at the government run lottery system. Pennsylvania along with all the other states runs a daily number. Hit it and win five hundred dollars. Place that same dollar bet with your local bookie and get six hundred. Same dollar but a better return, so where do you think most logical people will place that dollar? It is the same with cigarettes. I have “x” number of dollars to spend on smoking, do I use it to buy one package or two to three times that amount? To most people, it’s simple economics.

When revenue falls short of expectations, government will then tout that less people are smoking, so it is a good thing even though the budget shortfall will have to be filled by other means or another tax increase on cigarettes. Don’t believe it, smokers went to a different supplier, one who does not pay taxes; and to combat this underground economy (while publically pretending it does not exist or is not that large an issue), our leaders put the police into the fray to staunch the flow of dollars. Unfortunately, such decisions frequently lead to conflict between the police and the public. Do you remember why the police engaged Eric Garner?

Not only does organized crime and low level free-lance criminals profit from these tax hikes but so do terrorists. Cigarette smuggling has long been a staple source of income for them. A van and a trip to Virginia or the Carolinas – low cigarette tax states – will do. Within about a month, a well run operation can see profits in the tens if not hundreds of thousands of dollars. Enough to fund an attack on the scale of 9/11 (estimates of the cost of the 9/11 attacks is in the range of half a million dollars).

When government resorts to gimmicks to plug budget shortfalls such as dramatically increasing taxes on cigarettes, alcohol and other “sin” products be on guard as these taxes rarely produce the promised income to fix the budgetary mess. Other measures will need to be employed to get the extra funds such as doubling down on the cigarette tax, which again will fall short. It creates a vicious cycle that is not easy to escape. What these tax increases do is create an underground economy and all the social mayhem that goes along with it – disorder, crime and even terrorism.

Harrisburg, here is an idea – try and live within your means before you create havoc by your irresponsible tax hikes.

Are Hillary’s Lawyers also Skating?

In Uncategorized on July 8, 2016 at 11:22 am

In FBI Director James Comey’s testimony before Congress and in his earlier press conference, he made many a startling statement, most of all, that Hillary should not be indicted for her mishandling of classified material even though her actions with her off the grid email server fit the definition of a crime – to a tee. In explaining away this mess, he also said something startling about her lawyers, which has fallen under the radar.

In Director Comey’s statements, he said much information was lost and may never be recovered; and while talking about the missing information, he stated that Hillary’s lawyers scrubbed their devices in such a way as to make recovery of the underlying information impossible.

Hmm? Is something amiss here?

Most people with a basic understanding of the law know that destruction of evidence is a crime in and of itself. It does not matter if the destruction is done by a person under suspicion or by their lawyers.Hillary surrendered physical evidence to her lawyers. This simple act did not immunize her or them from preserving such evidence. One must remember, that the attorney-client privilege protects words and not physical things. So the lawyers’ ethical obligation was to preserve the evidence and turn it over to the investigating authorities. This does not mean that they have to explain how the evidence came into their possession but nonetheless, they must surrender it. So, in this case, her lawyers had to turn over all the electronic evidence to the FBI. And as we know, they did not do that as their devices were scrubbed in such a way as to make full recovery impossible.

What documents were withheld? Good question. How about the meta data that could reveal said documents? Again, good question. All of this is physical evidence that the lawyers had an ethical and legal obligation to preserve and turn over to the FBI. And as FBI Director Comey said, they did not do that. Yet, they along with Hillary will skate.

Think of it this way. A person comes into a lawyer’s office under suspicion of shooting someone. The suspect hands over a gun and the lawyer takes that gun and throws it into the ocean. Sound legit? Of course it’s not but that is what Hillary’s lawyers just did. Yet, not a bit of concern from the FBI.

Wonder why?

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Wawa and Sheetz: Together Giving Their Customers the Business

In Uncategorized on June 28, 2016 at 12:34 pm

A recent statewide poll gave fans of both Wawa and Sheetz a chance to show their love for these cherished Pennsylvania institutions. And what is not to love? When one can offer convenience, gas and great food to get on the go, people will flock to your stores. These companies business models depend on cultivating a dedicated fan base for their continued success and from the look of it, Wawa and Sheetz are succeeding beyond their wildest dreams.

These companies profit handsomely from the devotion; however, do they return the love? Or is there something more sinister to their business models that require extra scrutiny not only from their dedicated legions but those in government?

Anyone who has travelled extensively in the Philadelphia region (from the Poconos to the Jersey Shore) cannot help but notice the ever ubiquitous Wawa store. Need to fill up on gas or get a quick bite, Wawa is only a stone’s throw away. However, if you travel to mid-state, Wawa disappears and is replaced by the ever-present Sheetz. Likewise, for those in need of gas or something to eat, there’s a Sheetz lurking just around the corner to satisfy one’s urgent needs of the day. Strangely, despite their popularity and success, there appears to be a line of demarcation between these two competitors, where never the twain shall meet. This seems odd as one would think that a successful company would want to grow as much as possible to ensure success; but Wawa and Sheetz seem to think the opposite – let’s stay within our fiefdoms and avoid leaving our safe spaces.

Why would a company think this? And is it of concern not only to the consumer but our elected officials?

Any person with a basic knowledge of economics knows that competition drives down prices. So by staying out of each other’s turf, Wawa and Sheetz can charge their loyal customers more money for the products that they sell. Here in central Pennsylvania gas prices usually run about ten to fifteen cents a gallon higher than elsewhere. Why? Because Sheetz sets the market price as it has no real competition. Now, if Wawa would move into central Pennsylvania, the price of gas (along with the food that Sheetz sells) would reflect the new reality of competition; so too would the Philadelphia region if Sheetz would set up shop there.

Wawa and Sheetz fans, are you feeling the love?

Although these companies are acting in their own self-interest and not in the customers, is there anything that can be done about this? To answer that, one must realize what these two companies are doing is illegal.

Essentially what Wawa and Sheetz are accomplishing thru their non-competition is to divide the marketplace by geography; and, the effect of this division reduces competition. If both sides will not play in the other’s sandbox, the one who controls the sandbox controls the game. With this power, one can dictate the prices one charges and therein lays the problem as prices will not be charged under any rational economical basis but upon the whim of whoever controls the proverbial sandbox. Our law has had a longstanding prohibition against such anti-competitive practices and it is quite perplexing to see that this arrangement has not been laid to rest by the appropriate authorities.

Since the late 19th century, the practice of competitors carving up markets has been outlawed under the Sherman Act. The Sherman Act was put in place to protect consumers from this predatory practice of throttling free trade. If certain companies are left to their own devices, they will conduct any and all practices to line their pockets at the expense of their paying customers. Hence, laws are put in place to protect the consumer. What Wawa and Sheetz have been doing for a long time violates basic long-standing economic principles. It is well-known that when no one is watching the hen-house, the fox will attack. The real question is why has it been left unguarded, for so long?

To understand how real competitors conduct themselves in a free market place, look no further than Lowes and Home Depot. If you see one, you know the other is just around the corner. Why don’t Wawa and Sheetz operate in a similar manner?

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