The Greeks smoke and drink too much, or the supply of alcohol and tobacco has contracted considerably.
The National Statistical Service of Greece put out its September consumer price data. One of the ways in which the numbers are presented is as an index in which all prices at the start of 2009 are put at 100. That allows economists to see inflation over a two-year period. The only large increase in the cost of goods was for alcohol and tobacco. The CPI total for all products in September was 109.5 when compared to 2009. The figure for alcohol and tobacco was 126.18.
The Greeks, as they struggle with lower wages, will have to spend a larger and larger portion of their incomes on sin. The only alternative is to fine-tune their ability to dodge taxes so they have the discretionary income to maintain a lifestyle that includes a drink and a smoke.
The CPI information should show the Greek government which portions of consumer activity should best be taxed, if the government can improve its tax collection techniques. A sin tax would collect money from purchases that the Greeks are willing to make even as the prices for those items rise. The rise in price for food and nonalcoholic drinks is only 102.88 compared to the 2009 scale. The cost of clothing and footwear is only 109.29.
Sin taxes are widely used in the U.S. because people who drink and smoke are not as sensitive to price increase as people who buy clothes and shoes are. The Greek government can add property and VAT taxes, but they will be taxing the wrong things.
Douglas A. McIntyre
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