First, the mention of smoking was an unwelcome and unnecessary addition to an otherwise fine speech. Indeed, the overall tone of the address was somewhat libertoid: government is imperfect and needs reform, mostly through shrinking it. But near the end, Mitch made this bathotic digression on a healthism. I still believe he has a sincere commitment to smarter government, but that he included this is troubling.

Second, the coverage of the SotS Address has been overwhelmed by headlines of "Daniels Proposes Tax Increase." This is terrible because Daniels said so many other good and important things. Proposing a tax on cigarettes took the focus off of the higher priorities and exposed Daniels to attacks. This is precisely the lack of political skills for which I criticize the Republican leadership below. Daniels has only himself to blame for muddying the waters.

Yet as much as the tax increase has mushroomed in the public debate, I'm not that exercised about it as a policy, which should be surprising for a libertarian.

First, most anyone will acknowledge that government must raise revenues somehow, and among the options, vice taxes seem among the least objectionable. (Let's not forget that last year, Daniels was calling for "temporary" progressive taxation. A tax on cigarettes is progress.) Vice taxes have two chief virtues: 1) they are avoidable and 2) they internalize negative externalities -- even if the revenues aren't directly used for medical expenses, they discourage consumption and free up money elsewhere. I will acknowledge that they also encourage secondary ('black') markets, fraud, and evasion, but based on questions I've posed to a consultant for the Legislative Services Agency, these latter objections aren't that substantial. For example, people going across the Kentucky border to stock up on smokes aren't going to significantly undermine the tax. Besides, don't other forms of taxation create incentives for even more destructive forms of evasion?

Second, vice taxes are indeed paternalistic, but even here, the government could do far worse in hectoring us to be more healthy. Taxing cigarettes is not as invasive as a smoking ban. And unlike public health campaigns, it brings in revenue instead of spending it (on TV spots people ridicule or ignore, for instance).

And even if a cigarette tax has a neutral effect on revenues and health, at the very least, it will be a transparent use of government power for clearly identified ends, which is more than one can say for a lot of government programs. In short, the threat to our liberties from this tax are minimal compared to other policies, which are surely more worthy of our attention.