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Politicians try to fund pet projects, raise revenues by sticking it to smokers
By Geoffrey Segal
With legislative season in full swing around the country, tobacco once again finds itself in the crosshairs of money-hungry legislators. Year in and year out, tobacco is one of the top targets for tax increases. In 2002, 21 states boosted cigarette taxes and another 17 followed in 2003. This year about 20 states - plus the federal government - are considering a tax hike.
Traditionally tobacco taxes have been justified as a way to offset the harmful health effects of smoking. But now cigarette taxes are being diverted into programs and activities that have nothing to do with smoking or its harmful effects, including balancing budgets, increasing education spending, and expanding health insurance coverage.
Sen. Gordon Smith (R-OR), successfully attached an amendment to the federal FY08 budget resolution calling for up to a 61 cent increase in the federal tobacco tax. Raising the tax from its current 39 cents to $1 per pack would bring in as much as $35 billion in revenues. Smith wants the new money to expand the State Children's Health Insurance Program, which helps states insure children, to include adults.
Meanwhile, lawmakers in Indiana are considering a health care plan that would be funded by raising the state's current cigarette tax of 55.5 cents per pack by another 25 cents. Billed as a "market-based insurance plan," Hoosiers who smoke would be asked to subsidize health insurance other uninsured Hoosiers. This is a growing theme around the country: cigarette tax hikes being used to cover the uninsured is being considered in at least Maryland, Wisconsin, Oregon, and Iowa.
Maine's lawmakers want an additional $1 per pack because they just can't seem to balance the state budget without reaching into the pockets of smokers again.
All of these policy goals may be worthy ideas. However, in each and every one of these cases, a tobacco tax increase is not the fairest or best mechanism to fund these programs. It's about lawmakers looking for an easy way out.
Politicians continue to go to the well, trying to extract more and more money from a politically unpopular minority group of taxpayers – smokers - to fund a host new health, social, and spending programs that are generally unrelated to smoking. Because smokers are unpopular and do not represent a large segment of society, lawmakers feel free to propose massive tax increases without worrying about political backlash or a voter revolt.
Proponents often try to justify the tax increases by saying the programs are important to society and that they'll benefit everyone. If they're so important and beneficial, why is this funding not allocated out of the fast-growing budgets? Clearly, the state legislatures and Congress did not find these programs to be enough of a priority to provide funds.
Furthermore, if a program has broad based benefits, shouldn't everyone pay for it? Why should a small minority of taxpayers be forced to foot the bill for programs an entire state or population will allegedly benefit from?
In reality, the consequences of cigarette taxes are manifold. First, these taxes disproportionately affect lower-income families—many of whom will not stop smoking because of the higher cost. Second, new taxes let governments off the hook. Lawmakers don't have to prioritize expenditures or make tough fiscal decisions because the revenues allow them to expand and grow government without any limits. Finally, the very philosophy behind these taxes should be of concern for all Americans. Using taxing authority to social ends—in this case, stopping smoking—should concern us all, especially as debates about junk food and soda taxes sprout up across the country.
There are signs that the public realizes the unfairness of excessive cigarette taxes and has had enough. In November 2006, California voters rejected a massive cigarette tax increase that would've funded a smorgasbord of health care programs.
People don't want smokers taxed into bankruptcy. We want our leaders to show some fiscal discipline, reduce the spending and waste, and eliminate the pork and earmarks.
Geoffrey F. Segal is director of government reform at Reason Foundation. An archive of his work is here and Reason's government reform research and commentary is here.
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