Accuracy in Media

The main claims that politicians make when they raise taxes on
cigarettes have been found to be wanting, and very expensively so, by
the National Taxpayers Union. The NTU’s Kristina Rasmussen provides “five reasons why non-smokers should oppose high tobacco
taxes.” Rasmussen worked from the primary source of actual state
budgets.

First, argued Rasmussen, “states with low cigarette
taxes tend to have lower overall tax burdens.” Analyzing the 16 states
with the highest per-pack cigarette tax, Rasmussen discovered that
these same states had a higher “per capita state and local tax burden”
compared with the 16 states with the lowest per-pack cigarette tax. For
example, New Jersey had the highest cigarette tax at $2.75 per pack; South Carolina the lowest at $.070. New Jersey’s per capita tax burden was $5,234,
while South Carolina’s was $3,213. Rasmussen organized both the tax
burdens and cigarette taxes in two tables of 16 states. On the high
cigarette tax side, overall burdens reached over $6,000 (Connecticut). On the low side, only one state’s overall burden reached $4 ,000 (Virginia).

Secondly, Rasmussen demonstrated that “tobacco tax hikes are rarely
used to cut other taxes.” Instead, state and local legislators tended
to commingle tobacco taxes “with other tax increases” or “with cuts
worth less than” the actual tobacco increase. In 2003, 19 states hiked
tobacco taxes; yet, only one of them offset the hike. The only other
year since 2001 that a state has offset tobacco hikes was in 2007. This
led Rasmussen to conclude that states “don’t refund the revenue” from
tobacco taxes—“they spend it.”

Rasmussen next showed that “tobacco tax hikes don’t forestall other tax
increases.” Between 2001-2006, “taxpayers faced a 7 out of 10 chance of
seeing another net annual tax hike within two years of a tobacco tax
increase.” Again, in 2003, 19 states increased tobacco taxes and 15 of
them added additional taxes within two years. Rasmussen noted that
“many” of the “revenue actions took place during a period of strong
economic growth…and hefty budget surpluses.” When the economy is good,
then, legislators taxed more.

Rasmussen’s fourth reason for non-smokers not supporting tobacco tax
hikes was because “tobacco tax hikes may encourage other tax hikes down
the road.” States may implement new spending programs or increase
spending on existing programs from the extra taxes collected on
tobacco. For example, Rasmussen quoted Arizona Governor Janet Napolitano’s quip, “we need the money from cigarettes.” The governor wanted “to fill
a $1.3 billion budget hole” caused by additional “education spending
mandates.” Other proposed programs from other states included health
care in California (which was defeated) and the State Children’s Health Insurance Program (SCHIP) through the federal government (also defeated). Rasmussen
pointed out the irony in these programs: “schemes that tie dedicated
program funding to higher tobacco taxes would make government
increasingly reliant on revenues…from the very product…it supposedly
hopes to extinguish.” In other words, using cigarette money increases
the need for cigarette purchases.

Finally, stated Rasmussen,
“tobacco taxes don’t spur economic growth.” The 19 states which hiked
tobacco taxes in 2003 actually showed a “lower average growth rate”
compared to “those states that did not adopt an increase.” Average GDP
growth for all the states in 2005-2006 fiscal year was 3.4, while the
average GDP growth for the nineteen tax-increase states was 2.8—a .6
difference.




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