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Reason Foundation

No New Taxes in Idaho... Except on Cigarettes

Taxing smokes is not the way to budgetary health

David Godow
February 25, 2011

State lawmakers in Boise, who have shown admirable restraint on spending and tax issues in recent years are showing cracks in their fiscal armor. Under pressure from the estimated $340 million state budget deficit, the legislature has turned to using a classic gimmick rolled out by policymakers during tough times: cigarette taxes.

A bill sponsored by Rep. Dennis Lake (R-28A) the cigarette tax by a whopping 219 percent to reduce the budget shortfall for fiscal year 2012. The $1.25 a pack tax increase will take the state's $0.57 per pack rate to $1.82 per pack, a level higher than all of Idaho's neighbors but one: Washington's $3.025 per pack levy.

In order to avoid trampling Gov. Butch Otter's pledge for no new taxes, Rep. Lake has dubiously suggested that this won’t be a tax increase, but instead a “user fee.” He argues that cigarette tax revenues are just payments to the government for the money it spends treating tobacco-induced illness, especially through its Medicaid program. What about smokers who pay the “user fee” but don’t collect government assistance for their health care?  I guess it's a tax for them.

Rep. Lake also suggests the tax hike will help reduce smoking rates, especially among impressionable youth. "We believe that kind of [tax] increase will discourage about 20 percent of young people that would otherwise start smoking from starting," said Lake.

Is that true? Just across the border in Montana, lawmakers increased cigarette taxes twice in 2005, taking their rate from $0.70 to $1.70 per pack. But anyone hoping for a big drop in youth smoking ended up disappointed. According to the Center for Disease Control's Youth Risk Behavior Surveillance System, teen smoking has dropped 1.4 percent in Montana since 2005. However, it fell by exactly the same amount in Idaho over the same time period—without a tax increase and with one of the lowest cigarette tax rates in the country.

Despite Rep. Lake's public health rhetoric, raising the cigarette tax looks suspiciously like a simple matter of budgetary convenience. It's a little too convenient that a $1.25 per pack bump in the tax rate, which until now has never been increased more than $0.30 at a time, would coincide with a budget emergency. It's unfortunate that state lawmakers' convenience comes at the cost of a disproportionately poor minority of Idahoans, as cigarette taxes are not only discriminatory, but notoriously regressive.

The legislature should be looking for ways to spur companies to hire and invest in Idaho, not trying to drain a few extra bucks from smokers. Unemployment in Idaho stands at 9.5 percent, higher than the national average and just one-tenth lower than the record set in 1982-83. The state Department of Labor reported in December the state had “a record 71,900 workers without jobs.”

It's easy to understand why tax increases targeted at smokers can make for good politics in times of budgetary trouble. Cigarette taxes fall on a minority of the population - only 14.8 percent of Idahoans smoke - so the pain of the tax increase isn’t felt by most taxpayers. Politicians feel they can escape the voter backlash that would come with broader tax increases. But targeting cigarettes is unfair, and will both hurt the poor and Idaho's recovering economy. Smokers did not get Idaho into this budget mess. Trying to offload the debt burden onto them is a cheap out for lawmakers that can do better. 


David Godow is Research Assistant


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