This article uses Jeremy Rifkin’s entropy theory to analyze the South Korean government’s cigarette tax hike policy, considers the trade-off between reducing smoking rates and raising tax revenue, and discusses how the policy may have a negative impact on social development by increasing the burden on the poor.
After reading Entropy by Jeremy Rifkin
After reading Jeremy Rifkin’s book Entropy, I thought about the concept of entropy and realized that income redistribution is a process of increasing entropy. The term entropy is mainly used in natural science to describe the disorder of nature, but in this book, the author argues that social phenomena can be interpreted like natural phenomena by applying the concept of entropy to human society. Therefore, the concentration of wealth in certain classes is a decrease in entropy, which indicates disorder, and just as a decrease in entropy in nature leads to the destruction of the system, various policies should be enacted in the direction of increasing entropy to develop constructively in our society. So I was looking to see if South Korea’s income redistribution is being enacted in a way that increases entropy, and I came across the tobacco tax hike policy.
The South Korean government submitted a bill to the National Assembly on September 12-15, 2014, to raise the price of cigarettes after a four-day legislative preview. But why did the government rush to amend the bill without sufficient public consultation? I’ve done some research on the government’s policy of raising tobacco prices, and I’m going to use it to argue against the government’s policy.
The harms of tobacco and the government’s policy
It has long been recognized that tobacco is very harmful to the body. It is a strong risk factor for cardiovascular disease, causing vasoconstriction, damaging endothelial cells, stimulating adrenaline release, causing cellular hypoxia, increasing LDL (bad cholesterol), and contributing to atherosclerosis and cancer. The World Health Organization (WHO) bans the production and sale of foods that contain just one known or suspected carcinogen. However, cigarettes are the only product that is sold in defiance of this rule, and although they contain about 60 different carcinogens and addictive substances, many adults smoke them because they are recognized as a favorite food. Currently, 44.3% of adult males in South Korea smoke, and it is only natural that the country should prevent its citizens from consuming carcinogens. I am in favor of these measures. However, upon closer inspection, the government’s tobacco tax hike seems to be a policy aimed at increasing tax revenue rather than reducing smoking rates, and as a non-smoker, I strongly oppose it.
The logic behind the pro-tax position
The proponents of tobacco tax hikes argue that they will reduce smoking rates among the population. Over the years, the government has run various anti-smoking campaigns, but they have had only modest success, with smoking rates decreasing by only 0.8%. However, the researchers conclude that cigarette tax hikes have a direct effect on reducing smoking rates, citing the example of a 9% decrease in smoking rates when the price of cigarettes was raised by 500 won in 2004. They also argue that the increased tax revenue from tobacco tax hikes allows more taxes to be invested in various welfare programs, such as anti-smoking campaigns. Finally, they argue that higher tobacco taxes can reduce youth smoking rates. This is because higher cigarette prices make it harder for young people to afford to buy cigarettes, which is a problem in South Korea, which has the highest youth smoking rate among OECD countries. Those in favor of raising tobacco taxes argue that it is necessary and appropriate for a variety of reasons.
Problems and social impacts of tobacco tax hikes
However, there is a fatal blind spot in their logic. It’s that this policy will increase the burden on the common man. Increasing the burden on the common people means widening the gap between the rich and poor, and from an entropy perspective, it means that society changes in a way that does not increase entropy. This means that in the long run, Korean society will not develop and may stagnate. The reason why the cigarette price hike increases the burden on the common people is that most of the smokers are low-income people. The sudden increase in tobacco taxes reinforces income inequality, where those with lower incomes pay more taxes. Even before the tax hike, cigarettes were the most income-regressive product in South Korea. It is highly doubtful that raising the price of cigarettes by another 2,000 won will increase the entropy of Korean society.
There is also a big problem with the price composition of the 2,000 won increase. About 30% of the price, or 594 won, is charged as an individual consumption tax. The individual consumption tax was originally called the special consumption tax, and it was a tax category that existed to redistribute income. It was an indirect tax that was levied on purchases regardless of income, and was mainly levied on luxury goods and paid by high-income earners. It makes little sense that such a tax would be imposed on cigarettes. In short, it would be like asking low-income people to pay a tax on luxury goods. Even from the perspective of income regressivity, raising tobacco taxes seems to be an inappropriate policy that reduces the entropy of Korean society, and there are many problems from other perspectives as well.
According to the Korea Institute for Health and Social Research’s “Pricing Effects of Tobacco and Alcoholic Beverages” report, low-income people are willing to quit smoking if the price of a pack of cigarettes is 8,497 won. This means that if the government truly wants to reduce smoking rates, it should raise the price of cigarettes to around 9,000 won instead of 4,500 won. So why did the government set a specific figure of 2,000 won as the price increase? The answer lies in the short-term addictive nature of cigarettes. If the price of cigarettes is raised by only 2,000 won, many people will still smoke, and that’s when the most taxes will be collected. It is questionable whether the government prioritized people’s health or tax revenue.
According to the WHO, once the smoking rate drops below 5%, cigarette sales can be legally banned. I am not opposed to raising tobacco prices because I believe that if South Korea’s smoking rate falls below 5% and cigarette sales are banned, and the entire population quits smoking, the incidence of cancer and cardiovascular disease will decrease. However, if the government is pushing for a tobacco tax hike to raise revenue, I think it would be better to not implement this policy at all for the sake of the common people.
Examples from other countries and the Korean reality
There is also a new argument that cigarette price hikes are not related to smoking rates. Ireland, where a pack of cigarettes costs over 10,000 won, has the sixth highest smoking rate in the world at 31%. This suggests that smoking rates are not simply controlled by the price of cigarettes, but can also be influenced by the social climate. Also, South Korea does not currently require strong smoking warning pictures on cigarettes. Most countries try to reduce smoking rates by requiring strong warning pictures, but South Korea has ignored public opinion in favor of strong and repulsive warning pictures and replaced them with warnings. It’s worth questioning whether the government is really trying to reduce smoking rates.
Finally, some argue that the taxes raised from the tobacco tax increase could be used to fund more anti-smoking campaigns. However, according to the National Assembly Budget and Policy Office’s budget proposal, only 5.47% of the increase in tax revenue, or KRW152.1 billion, was allocated for anti-smoking support. The government said at a press conference that if more tax revenue is raised from the tobacco tax hike, it will focus on smoking cessation activities and anti-smoking campaigns. However, only about 5% of the budget was allocated to anti-smoking campaigns, and the rest of the budget was allocated to the medical industry and IT convergence industry. This is in line with the idea of collecting more taxes from the common people to invest in high-tech industries. If more taxes are needed to invest in high-tech industries, more taxes should be collected from those with higher incomes to redistribute wealth and increase the entropy of the society as a whole, which is healthy. However, the government is pursuing a policy of raising tobacco taxes to collect more taxes from the poor. I strongly disagree with the government’s policy of ignoring the long-term future in favor of short-term tax revenue.
Proposing a new policy
As I said earlier, tobacco contains about 60 different carcinogens and addictive substances. However, the reason why people continue to use tobacco is to temporarily relieve the intense stress of daily life. Within five seconds of taking a puff, tobacco smoke reaches the brain, releasing a hormone called dopamine, which temporarily relieves stress.
We all know that smoking can’t be a permanent and constructive solution. However, I hope that the government will recognize that for low-income people who are desperate for every moment of their lives with no solution in sight, smoking is a necessary evil that they cannot quit even though they know it is harmful. I think we need a new policy that fits the current reality of Korea. First, the government should either raise the price of cigarettes to a higher price of 9,000 won to encourage most people to quit smoking, or second, the government should abandon the cigarette price hike and collect more taxes from high-income earners to secure tax revenue for the medical and IT convergence industries. I oppose the current government’s policy of raising cigarette prices because it prevents society from moving in the direction of increasing entropy, and from an entropic perspective, it prevents the healthy growth of Korean society.
