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Eric Fruits on Oregon’s Excess Revenues

Presentations & Interviews ICLE Chief Economist Eric Fruits joined the City Club of Eugene show on NPR affiliate KLCC for a segment on the “kicker” certain Oregon households . . .

ICLE Chief Economist Eric Fruits joined the City Club of Eugene show on NPR affiliate KLCC for a segment on the “kicker” certain Oregon households are scheduled to receive when they file their taxes in 2022. The full segment is embedded below.

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Eric Fruits on Metro Portland’s ‘Homeless Tax’

Presentations & Interviews ICLE Chief Economist Eric Fruits appeared in a news segment on KATU-TV about a new tax that will fund services for the homeless in Metro . . .

ICLE Chief Economist Eric Fruits appeared in a news segment on KATU-TV about a new tax that will fund services for the homeless in Metro Portland counties. The full piece is embedded below.

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Eric Fruits on Tax Day

Presentations & Interviews ICLE Chief Economist Eric Fruits joined a discussion on KGW News in Portland, Oregon, about 2021’s delayed Tax Day, where state and federal taxes go, . . .

ICLE Chief Economist Eric Fruits joined a discussion on KGW News in Portland, Oregon, about 2021’s delayed Tax Day, where state and federal taxes go, and how Oregonians feel about taxes. The full video is embedded below.

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The Rise and Rise Of IFCs

Popular Media As the COVID-19 pandemic rolls on, leaving death and economic destruction in its wake, governments around the world have responded with massive ‘stimulus’ programs funded . . .

As the COVID-19 pandemic rolls on, leaving death and economic destruction in its wake, governments around the world have responded with massive ‘stimulus’ programs funded by issuing debt. Many governments, including the US, UK, and most EU governments now have debt: GDP ratios that exceed 100 per cent. Unless economic growth rebounds rapidly, the repayment of this debt is likely to become a major burden.

Read the full piece here.

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Financial Regulation & Corporate Governance

ICLE Comments Regarding European Commission Guidelines on Certain State Aid Measures in the Context of the System for Greenhouse Gas Emission Allowance Trading Post 2021

Regulatory Comments Emission trading programs have the potential dramatically to reduce the costs of abating pollution. When such programs are well designed, they can reduce abatement costs . . .

Emission trading programs have the potential dramatically to reduce the costs of abating pollution. When such programs are well designed, they can reduce abatement costs by as much as 50%.

Most emission trading programs address local ambient air pollution. As such, problems associated with the harmful redistribution of pollution from one place to another are relatively easy to address through the application of simple rules, such as an absolute cap on emissions in a certain location. Some greenhouse gases (GHGs), such as carbon dioxide (CO2), are not local pollutants and so do not justify such local restrictions. However, there is at present no global system in place that would cap GHG emissions. As a result, jurisdictions that impose local caps on GHG emissions may experience a shift in economic activity, as large emitters of GHGs choose to relocate their activities to jurisdictions with less onerous restrictions on GHG emissions. This is called “carbon leakage”. While carbon leakage may potentially lead to increased CO2 emissions, excessive measures to prevent its occurrence may be worse than the disease they are intended to cure

State aid rules are designed to promote competition within the EU. Historically, the EU has granted exemptions to state aid rules for certain measures that are intended to mitigate the potential for carbon leakage. Unfortunately, previous exemptions have contributed to a weakening of the functioning of the EU Emission Trading System (ETS) and likely contributed to its near-collapse on at least two occasions.

The current exemptions terminate at the end of December 2020. This comment evaluates the proposal to establish new exemptions to state aid rules after the current exemptions terminate. We find that, in their current form, the proposed new guidelines would permit Member States to grant state aid (in the form of free ETS allowances) that would ultimately be deleterious to its stated goals of reducing European CO2 emissions. Furthermore, the draft guidelines leave too much room for protectionist subsidies and the distortion of competition between electricity producers.

 

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Innovation & the New Economy

Taxing e-cigarettes may do more harm than good

Popular Media To fill an anticipated $876 million budget hole in the 2019-21 biennium, the Oregon Health Authority is pursuing a $300 million increase in taxes on tobacco products, . . .

To fill an anticipated $876 million budget hole in the 2019-21 biennium, the Oregon Health Authority is pursuing a $300 million increase in taxes on tobacco products, including e-cigarettes and other vapor products. The agency has not provided any indication what an e-cigarette tax would look like, which invites the question whether e-cigarettes and other vapor products should be taxed at all and, if so, at what rate?

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Innovation & the New Economy

Vapor products, harm reduction, and taxation: Principles, evidence, and a research agenda

ICLE White Paper ICLE has released a white paper entitled Vapor products, harm reduction, and taxation: Principles, evidence and a research agenda, authored by ICLE Chief Economist, Eric Fruits.

More than 20 countries have introduced taxation on e-cigarettes and other vapor products. In the United States, several states and local jurisdictions have enacted e-cigarette taxes.

Most of the harm from smoking is caused by the inhalation of toxicants released through the combustion of tobacco. Non-combustible nicotine de-livery systems, including e-cigarettes, “heat-not-burn” products, smokeless tobacco and other nicotine delivery systems, are generally considered to be significantly less harmful than combustible cigarettes.

Policymakers face a wide range of strategies regarding the taxation of va-por products. On the one hand, principles of harm reduction suggest vapor products should face no taxes or low taxes relative to conventional ciga-rettes, to guide consumers toward a safer alternative to smoking. On the other hand, the precautionary principle as well as principles of tax equity point toward the taxation of vapor products at rates similar to conventional cigarettes.

Analysis of tax policy issues is complicated by divergent—and sometimes obscured—intentions of such policies. Some policymakers claim that the objective of taxing nicotine products is to reduce nicotine consumption. Other policymakers indicate the objective is to raise revenues to support government spending. Often missed in the policy discussion is the effect of fiscal policies on innovation and the development and commercialization of harm-reducing products. Also, often missed are the consequences for cur-rent consumers of nicotine products, including smokers seeking to quit us-ing harmful conventional cigarettes.

Policy decisions regarding taxation of vapor products should consider both long-term fiscal effects, as well as broader economic and welfare effects. These effects might (or might not) suggest very different tax policies to those that have been enacted or are under consideration.

Our research concludes the economics of harm reduction with respect to vapor products is an area in need of reliable empirical research.

  • Within a harm reduction framework, some policy objectives overlap and others conflict. For example, an objective to encourage current smokers to switch to less harmful e-vapor products largely is con-sistent with an objective to discourage dual use. On the other hand, policies that encourage switching may conflict with an objective to discourage youth uptake of vapor products. The extent of the net eco-nomic benefits of vapor products in a harm reduction framework are empirical matters of degree that require reliable research. To date, there is no peer-reviewed published research quantifying the net economic benefits of vapor products with respect to harm reduction.

 

  • The small body of research on consumer demand response to e-ciga-rette pricing finds a wide range of estimates of e-cigarette own-price elasticity and cross-price elasticity with respect to conventional cig-arettes, even among studies using the same set of data. Without re-liable empirical research, policymakers face great uncertainty regarding whether specific tax proposals will achieve—or con-found—their stated policy goals.

 

  • Despite the innovations that gave rise to the market for vapor prod-ucts, virtually no empirical research has evaluated the impacts of taxation and regulation on innovation in the industry. Differential taxation of vapor products would like induce a supply-side response, but there is no quantitative research on supply at this time.

Principles of harm reduction recognize that every proposal has uncertain outcomes as well as potential spillovers and unforeseen consequences. Nev-ertheless, the basic principle of harm reduction is a focus on safer rather than safe. Policymakers must make their decisions weighing the expected benefits and expected costs. With such high risks and costs associated with cigarette and other combustible use, taxes and regulations must be devel-oped in an environment of uncertainty and with an eye toward a net reduc-tion in harm, rather than an unattainable goal of zero harm.

Click here to continue reading the paper.

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Antitrust & Consumer Protection

E-cigarette taxation: Lessons from “sin taxes”

TOTM The Economist takes on “sin taxes” in a recent article, “‘Sin’ taxes—eg, on tobacco—are less efficient than they look.” The article has several lessons for policy makers eyeing taxes on e-cigarettes and other vapor products. Historically, taxes had the key purpose of raising revenues. The “best” taxes would be on goods with few substitutes (i.e., inelastic demand) and on goods deemed to be luxuries.

The Economist takes on “sin taxes” in a recent article, “‘Sin’ taxes—eg, on tobacco—are less efficient than they look.” The article has several lessons for policy makers eyeing taxes on e-cigarettes and other vapor products.

Read the full piece here.

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Antitrust & Consumer Protection

Joking about politics

TOTM On November 3rd, the president of the United States spoke at the Hotel Lowry in St. Paul, Minnesota, in what was billed repeatedly as a . . .

On November 3rd, the president of the United States spoke at the Hotel Lowry in St. Paul, Minnesota, in what was billed repeatedly as a bi-partisan address. The president ridiculed reactionaries in Congress who he claimed represented the wealthy and the powerful, and whose “theory seems to be that if these groups are prosperous, they will pass along some of their prosperity to the rest of us.” The president drew a direct line between prosperity and increased “fairness” in the distribution of wealth: “We know that the country will achieve economic stability and progress only if the benefits of our production are widely distributed among all its citizens.” The president then laid out an ambitious agenda focused on creating jobs, improving education, expanding health care, and ensuring equal rights for all.

Read the full piece here.

 

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Financial Regulation & Corporate Governance