Tobacco out of CPI for benefit calculations

The Customs and Excise (Tobacco Products-Budget Measures) Amendment Bill passed its third reading on Tuesday.

All parties backed the bills that brought in the tax passed on a voice vote, but those removing tobacco prices rise from calculations to measure benefit CPI increases were opposed by New Zealand First, the Greens and Mana with 98 to 23 in favour.

Associate Health Minister Tariana Turia said lifting the excise duty would reduce smoking rates especially amongst younger people who were sensitive to price signals.

Turia said by 2016 the average price of a packet of cigarettes would rise to more than $20 and would make smoking unaffordable for many.

She defended taking tobacco prices out of the CPI indexing calculation for benefit increases saying it would not make sense to help fund smokers when trying to increase the cost of tobacco to them.

Increasing the price is a very effective measure for discouraging from smoking in the first place and encouraging smokers to quit.

I support this measure but wonder how much higher the price will go before it encourages a black market.

Keeping tobacco prices out of the CPI for benefit calculations will no doubt be seen as more beneficiary bashing but I don’t see why taxpayers should be funding people’s addiction to smoking.

2 Responses to Tobacco out of CPI for benefit calculations

  1. Kiwiwit says:

    Actually, taxpayers are not subsidising smokers. Treasury concluded in this report that “At over $1.3 billion per year, tobacco excise revenues may already exceed the direct health system costs of smoking. When the broader fiscal impacts of smoking are considered (eg shorter life expectancy reducing smokers’ superannuation and aged care costs), smokers are probably already “paying their way” in narrowly fiscal terms.”

    The CPI is already a poor measure of inflation because large prices increases in non-discretionary items such as food and energy are hidden by decreases in discretionary items like electronic goods. This disguises the true decrease in earning power faced by most New Zealanders, particularly those at the lower end of the income spectrum. Removing cigarettes from the index is just another attempt to misrepresent the real inflationary position.

  2. Andrei says:

    Nothing politicians like better than new taxes to spend on their pet projects, like plastic wakas, and junkets to climate change conferences in exotic climes where they can gather bullshit to figure out how to steal more.

    This one is especially attractive as it is one one they can use to bully the poor and the marginalized into conforming with their secular morality.

    Who the hell voted for this – was it ever in an election manifesto? Of course not, any more than gay “marriage” was and the other perversions they are forcing on us.

    These arrogant sobs are out of control.

    Why do support this measure, in what way does this help New Zealand prosper?

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