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Wednesday, March 17, 2010

I'm a little behind in responding to this story, but as long as Americans continue to smoke cigarettes, calls to increase taxes on the purchase of cigarettes will also continue. Reuters reported in a one-sided story that a $1 per pack tax increase on cigarettes would "reap" over $9 billion in increased tax collections.

The story quotes John Seffrin, chief executive of the American Cancer Society Cancer Action Network:

An increase in tobacco tax rates is not only sound public health policy but a smart and predictable way to help boost the economy and generate long-term health savings for states facing deepening budget deficits.
The American Cancer Society, in conjunction with the Campaign for Tobacco-Free Kids and various other advocacy groups, have long touted increased taxes as a means to deter smoking, often under the guise of increasing tax collections. These are two separate motives, and I will address each separately.

First, and most importantly, why do nonsmokers feel the need to FORCE smokers to quit? You should not be proud of making an activity too expensive for a person if they truly enjoy partaking in it. Some people truly enjoy smoking and do not want to quit. By making cigarettes more expensive, you will do one of two things to this type of smoker: 1. force them to spend more on cigarettes and less on other goods and services, or 2. force them to quit an activity they love. This should not be a proud moment for anyone.

The second motive is to supposedly increase tax collections for states. This, of course, assumes this is a state tax increase as opposed to a federal tax increase, as a federal tax increase will only serve to decrease states tax collections from cigarettes.

John Seffrin's quote states that cigarette taxes are a "smart and predictable way to help boost the economy." In one way, he is correct. Increasing cigarette taxes will surely boost the sales of black market cigarettes. A recent study found:
...hiking taxes $1 per pack will lead to a leap in the total smuggling rate in Washington from 39.3 percent to 51.5 percent. That is, 51.5 percent of the cigarettes smoked in the state of Washington will be contraband.

Commercial smuggling involves large-scale organizations that ship semi-tractor trailers and vans long distances and maintain complex distribution systems.

Our estimates indicate that nearly 30 percent of the smuggling will come from these commercial haulers. It’s worth noting that some of the trailers are actually hijacked from underneath legitimate truckers themselves.

In researching this post, I came across a report by the aforementioned Campaign for Tobacco-Free Kids entitled, "Raising State Cigarette Taxes Always Increases State Revenues." I have a general rule that when the title of an article contains a lie, there is not much need to read the rest of it.

For example, according to a Commonwealth Foundation study, in Pennsylvania:
After a 35 cent per pack increase in 2004, revenue fell by $72 million, and tax revenues remained below 2004 levels since then.
Of course, the more damning evidence against the projection that a $1 per pack tax increase would raise over $9 billion in new tax collections is that these projections have consistently been overestimated. The same Commonwealth Foundation study stated:
Of 57 state excise taxes imposed from 2003 through 2007, only 16 were found to raise as much revenue as projected. Thirty-nine state tax increases fell short of estimate by a range of 2% to 181%.
This doesn't exactly strike me as "smart and predictable."

Posted by Eleutherian

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  2. fakesteph Says:
  3. I quit smoking and there is not one day that I don't miss it. It was a really hard decision and money had nothing to do with it. I still consider it one of my favorite activities and associate it with some of my favorite memories. However... smokers are already paying a LOT for cigarettes. In California I was routinely paying over five dollars a pack. I assume most of that was taxes since the exact same pack would cost me around three dollars (under, actually) in Virginia. It is not fair to smokers to continually raise taxes on cigarettes when it is obviously not fixing the budget. We need to stop trying to generate revenue by taxing something morally ambiguous and instead focus on actually addressing our budget issues.

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