Why cigarettes ought to be heavily taxed?

   "Smoking is hazardous to your health". I heard this slogan of government, who wanted to persuade people to quit smoking, a long time ago. This is perhaps a justification for various policies to deter people from smoking. In fact, I think many people, including the government officials, believe in such an argument, supported especially by medical doctors. Therefore, cigarettes are heavily taxed and the government will also ban electronic cigarette as a recent initiative to curb smoking.
   I write this blog post not because I hate or like smoking. However, I have read one article that uses "economics" arguments to criticize the high cigarette tax policy. I am concerned with economics and I found the "economics" arguments in this article are problematic in some aspects. So, let me share with you.
   The Hong Kong government has increased cigarette tax quite frequently in recent years. The said article aims at criticizing this policy. Its arguments are summarized as below:

1. With these frequent tax hikes, those who still smoke are someone who will never quit. Their demand curve is nearly vertical. Further taxes cannot induce them to quit. 
2. Smuggled cigarettes are substitutes for legally sold cigarettes. Further tax hikes simply encourage more smuggling. 
3. Alcohol and junk food are also hazardous to health. But the government has chosen to cancel tax on red wine instead of banning wines, and it does not tax junk food. It is unfair to smokers.  

What do I think? I will not say these arguments use wrong economics. But it is another matter to say that these arguments can support a "no further tax" policy. The major problem of these arguments is that it is misplaced, assuming that the tax policy serves only one purpose: making the smokers healthier. Yes, this seems to be exactly what the government campaign against smoking is about. But I doubt that we should concentrate on, and only on, this single purpose.
   For Point 1, if tax is simply to reduce the number of smokers, it is perhaps justified to argue that tax is of no use anymore when demand is already vertical (though I doubt this is true: if tax is further increased, some very addictive smokers might also consider, by incurring a high cost, to quit, or at least they may reduce smoking). But tax also serves another purpose, i.e. collecting revenue for the government to provide its services to citizens. Normally, tax is a necessary evil: Taxation generates distortions and deadweight loss. Even so, the government still has to collect tax, or no service can be provided. Now, taxing cigarettes is another story: It is not a necessary evil. Taxing cigarettes already serves a positive function (however small): controlling a bad behaviours, namely, smoking. At the same time it also collects revenue. So, you can't simply say the tax is useless if it does not reduce smoking significantly, provided that it still generates revenue: without this tax, the government would have to collect more revenue from other taxes of necessary evil nature.
   For Point 2, taxing cigarettes increases the profits for smuggling. This is true. But this is also true for any taxes on any goods. Does it mean that we therefore should not tax any goods (whenever smuggling may be triggered by taxes), or not to raise the tax rates for these goods (so as to avoid triggering smuggling)? The answer to the first question is (quite obviously) "No", and it is not hard to arrive at this answer. The answer to the second question, however, depends. If there is a better way to achieve what the tax can achieve (but will not trigger smuggling), of course the answer should be "Yes". But is there? Of course, there is another way to reduce smoking but will not generate more smuggling, e.g. banning smoking in more locations. But is this a better way? We must consider the cost of enforcing such a policy (by sending law-enforcers to more non-smoking zones) and ask: Is it relatively less costly to ban smoking or to increase tax but devote more resource to anti-smuggling? There is no presumption that enforcing a ban must be less costly. Hence, unless we accept that reducing smoking (further) is not supportable (anymore), what we need to consider is the relative cost of achieving the goal, not to abandon the goal (whenever a bad side-effect is involved).
   For Point 3, this really touches upon the core issue: Why do we tax cigarettes but not other unhealthy goods such as junk food if the policy is to promote health? It seems that the current policy is unfair to smokers. Nevertheless, is cigarette taxed simply because of the health of the smokers as what the slogan in the first sentence of this blog says? I think this is the key point and the major blind spot. Most people, for or against cigarette tax, focus exclusively on this reason - the smokers' health - and nothing else. If so, we really should tax or ban also other unhealthy goods, including most wines and junk food. Why should we target only at cigarette? The answer, to me and many textbook authors of economics, is very clear: taxing cigarettes is for the health or benefit of the non-smokers.
   When a person smokes, a non-smoker will also suffer, breathing unhealthy second-hand smokes. In economics, this is called externality. On the other hand, drinking wines or eating junk food normally will not affect other people. It affects only the consumers' own health. There is no externality. In campaigns of public policy promotions, surprisingly, this is rarely mentioned. What is mentioned frequently is only the health of the smokers. This practice perhaps makes people forget what is the most crucial difference between smoking and other unhealthy goods. In fact, smoking is in a way not different from pollution. Regardless of whether it is good to the smokers or not, it affects other people (non-smokers) adversely, and in most circumstances the smokers will not take their harms on others into account when choose to smoke. That's why smoking should be, from an economics perspective, controlled by public policies.
     So, even if public policy makers forget this purpose, we should not: controlling smoking is for a good economics reason, i.e. externality. In fact, I think the article author mentioned above is not bad in applying economics. The article author knows how to use high-school level economics concepts for arguments. These concepts include demand elasticity, substitutes, and fairness. However, it misses something important: what is the purpose of taxing a good from the very beginning?