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Sunday, November 14, 2010

Smoking Ban and Taxable Sales: We'll Have That Data Shortly

South Dakota's smoking ban took effect Wednesday, expanding freedom for South Dakotans. My wife and I are already looking forward to smoke-free dinners at the Moonlite and other venues whose smoke previously would have sent us out the door without ordering.

The question remains: will the smoking ban hurt business? I still don't think so, based on various anecdotal and empirical examples and my own reasoning, and the fact that opponents of the ban, like State Senator Russell Olson, resorted to desperately stupid arguments. The Federal Reserve Bank of St. Louis also agrees with me (another reason my cousin Aaron will want to "END THE FED!!").

But we won't have to guess. We'll get our first bit of hard data next month, when the state Business Tax Division publishes the State Taxable Sales Comparison for November. Last month, statewide taxable sales in eating and drinking places were up 2.7%, $2.5 million, over October 2009—rather slow, given October taxable sales across all sectors were up 8.7% over October 2009. We'll also be able to look beyond monthly snapshots and consider fiscal year comparisons. FY 2010 showed a measly 0.6% growth in taxable dining-and-drinking sales over FY2009, though that sector still outperformed the overall 1.5% decrease in taxable sales.

gain in taxable dining and drinking sales
gain in overall taxable sales
Table 1: Change in South Dakota taxable sales by fiscal year

If we're really ambitious, we'll even be able to look at data city by city and look at eating establishments and drinking establishments separately. (Hey, Department of Revenue: any chance you could start posting this data in quick and easy HTML tables or Excel spreadsheets instead of those big honking PDF files?)

And even if I'm wrong, even if the revenue reports for the bar and restaurant sector show a decline in business that we can trace to the smoking ban and not to more people staying home to enjoy homemade rhubarb wine from their organic gardens while they watch movies on Netflix on their expanding broadband connections, any revenue decline will have to offset more than the hundreds of millions of dollars in health care cost savings as more people get the hint and kick the cancer sticks.

We'll also have to measure any revenue losses against some quantification of the freedom gained by more South Dakotans to relax and work in more places without smelling like butts.


  1. Looks like a backdoor attempt at weaning South Dakotans from video loottery. Any data, Cory?

  2. If there's a secret plot there, Larry, they're keeping it under wraps so far. It passed the Legislature in 2009, where I would think that, if it were a backdoor attempt to kill video lottery, which would necessarily mean pressure for a new tax to replace it, the Republicans would have stomped it.

    But we'll be able to check the video lottery revenue, too:


    What? No FY2010 report yet? Get on the ball, people!

  3. This will destroy video lottery and the 10% revenue it brings to the state's general fund.

    State income tax here we come.

  4. Sadly, but predictably, the tobacco companies are way ahead of the game on this front. Gamblers need't worry, there are still plenty of ways they can still get their nicotine fix without going outside to smoke.

    Thad and Larry, if you're predicting that addicts will quit being addicts, good luck with that idea. Ain't gonna happen.

  5. I sometimes wonder what people from the former Soviet republics think when someone equates "freedom" with the ability to eat out at a restaurant without second hand smoke.

    I can't even believe anyone would posit a position with the words "based on various anecdotal and empirical examples and my own reasoning." Is this guy the Wizard of Oz or something?

    And the Wizard has already constructed an out. If the data supports his thesis, he says "I told you so." If it doesn't, they just chose to stay home for homemade pie. I guess he is right if the numbers support his view. and right if they don't.

    And even if he is wrong, he is right because he gets to factor in the "value" of him going to someone else's business and not breathing in second hand smoke.

    The Wizard is always right. He interprets the facts and gets to pick the value of the benefits. The guy can't lose.

    If only the Wizard were king, we'd all get the honor of serving him. And, if he were king, we would have to rely on "hints" to do what is best for us. He'd change the "hints" into proclamations from the king.

  6. The urge to gamble is every bit as big as the urge to smoke. I predict there will be little to no drop in video lottery income. And if there is, so what. All it would mean is that some South Dakotan has more disposable income to spend on the necessities of life like food, clothing, the rent and utilities or school supplies for their kid.

  7. Nannystatery or Brothers Koch, Troy? Choose your own nightmare.

  8. Interesting tangent here. On SDWC they are talking about the pros and cons of Public Broadcasting and NPR. Someone down the thread a ways brought up the reminder that the Fed (i.e. ALL of US) owns the airwaves, and we charge private companies to use it. I'm assuming that goes for other aspects of the "air" as well (US Airspace for example. You can't fly over it without permission.)

    Doesn't it then follow that the air is in essence community property, Troy, and that the individual doesn't have any right to pollute it if we, the owners say they can't?

    Even if they surround some of it with a building that belongs to them?

    In general, I'd say we the owners have been pretty generous with the environmental assets we hold in common, Troy.

    But doesn't it behoove all recipients of that generosity to listen carefully when our State Legislature, and then We the South Dakota People via the ballot speak out in a loud, clear voice and say, "okay, fellas, enough is enough."

  9. Troy: it's not my fault that the folks asserting that the smoking ban will kill tax revenue have a really hard case to prove and very little in the way of solid evidence to prove it.

    And Nick has touched on a key economic point raised by the St. Louis Fed article: substitution.

    Larry: I'll choose the former... because I can fight and win against the nannystaters. I don't have the money to beat the oligarch/tyrants.

    Ah, that's right, Bill. We do have a pretty convincing mandate, from a Republican Legislature, no less, and a bunch of people who voted mostly for Republicans. Of course, the majority can still be wrong....

  10. I'm not convinced that the smoking ban will hurt gambling business in general or video lottery in particular.

    That theory is based on the assumption that a significant positive correlation exists between smoking and gambling. But does it?

    The fear is also based on the idea that video lottery afficianados will quit that activity if they can't smoke while they do it. Will they?

    Certain factions tried to get an income tax in Washington State by referendum on Nov. 2. It went down by a 2:1 ratio in that liberal state.

    Contrary to some people's notions, the people of South Dakota are anything but stupid.

    No fear! Let's wait for the data.

  11. Stan, I agree with your hypothesis and your recommendation, to wait for the data.

    Not having played video lottery, I can only speculate that there could be a positive correlation between smoking and gambling in that both activities might draw individuals prone to addictive behavior. (Possibly related: video lottery generates over 90% of South Dakota's gambling revenue; boring scrath tickets don't trigger the endorphins as much?) Or maybe requiring people to step outside to smoke interrupts the game-playing flow and thus makes it less likely that people will play the machines as intensely. Any possibilities there?

  12. Good eye, Stan. I love hold-em, smoke a pipe and have figured out how to do both. Many of my poker buddies (not me) play online where disposable income goes to offshore bank accounts instead of to the general fund.

    This scares the pp out the PPs.

  13. Thad-

    If you are correct I would be very happy with that outcome. Video lottery/gambling simply preys on the weak or ignorant.

    However, I personally doubt it will make a substantial difference. Addictive personalities are addictive personalities.


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