Calif.'s cautionary tobacco tax tale

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For the last several years, advocates for higher sin taxes have tried to cajole the Idaho Legislature into raising the tax on cigarettes, arguing that such increases are wildly popular with the electorate. It’s the ploy that the American Cancer Society tried with the Legislature last winter.

Now comes news to suck the air out of that room: Voters in California, of all places, have rejected Proposition 29, which would have raised that state’s cigarette tax by 115 percent. Slightly more than half of California’s voters opposed the idea, even though raising the tax to $1.87 per pack was billed a revenue boon that would funnel as much as $735 million to cancer research, smoking cessation programs and law enforcement.

The defeat is even more stunning when one considers polling from March, which showed that a supermajority of California voters were willing to cast their “yes” votes for Prop 29.

Part of that comes from the fact that it is very easy to do a pro-tax increase poll, where voters are asked, “How would you like to raise taxes on (insert the name of someone else here) in order to solve this list of problems?”

The results are almost always stunningly glowing. Most people don’t smoke, therefore a tax increase that appears to benefit me at the expense of everyone else seems to be an easy winner.

But Californians had some mental clarity over this issue: Yes, the tax increase would raise a bunch of money, but that money would just find its way into one or more government bureaucracies. And for what?

Cancer research is huge, with the federal government spending as much as $6 billion a year on such programs. Smoking cessation programs are already in place, with millions going to them.

And smokers are smart. Won’t they just go somewhere else for their smokes, where the taxes are lower or non-existent? They have and they do.

And indeed, what about that promise of barrels of money to serve a wide range of good causes? Mostly smoke, as evidenced by recent studies on the matter.

In 2009, the federal government raised the excise tax on smokes in order to fund the expansion of the State Children’s Health Insurance Program. But the U.S. Government Accountability Office has found that the tax increase hasn’t produced the money it was expected to. That means that the costs for such programs are shifted onto other taxpayers.

In the case of a federal government with ballooning budget deficits, the shift is onto the children and grandchildren of taxpayers.

Here in Idaho, even politicians who favor increasing tobacco taxes are faced with the same questions California voters posed, and with precious few answers.

The primary reason for any tax is to generate revenue for some kind of public purpose. Supporters for raising the cigarette tax simply can’t give a good story about what the extra money will be used for. Everyone knows that the money will be used to grow government, and no one is terribly excited about that. And no one can guarantee that the revenue raised from the tax increase will actually sustain the bureaucracies the tax creates.

Worse still is that the tax will lead to fewer Idaho jobs and do little to impact consumption as smokers find ways to avoid the higher tax rates. California voters figured this out, and the vote there should compel Idaho lawmakers to want to run as far away from tobacco tax increases as possible.

Wayne Hoffman is the executive director of the Idaho Freedom Foundation.

 

Source: Associated Press

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