But they said they weren’t going to raise cigarette taxes

By: Erick Erickson (Diary) | February 19th, 2009 at 10:06 AM |

RESIZE: AAA

Just about a month ago, I reminded Florida legislators that cigarette taxes used to balance the budget don’t work.

To be clear here, if you want to get rid of cigarette smoking, raise taxes to the point people can’t afford it. That’s fine.

But don’t say you are going to balance the budget with a cigarette tax increase because all the data shows us that raising cost of buying cigarettes lowers the use rate, which decreases the revenue generated therefrom.

It’s Economics 101.

The Florida Legislature thinks otherwise.

According to the Miami Herald:

State Rep. Juan Zapata, R-Miami . . . filed a bill (HB 887) to increase the cigarette tax by 65.1 cents per pack, bringing the total to $1 a pack. It could raise $471 million a year.

“The (budget) situation calls for action,” said Zapata, who is chair of the Human Services Appropriations Committee. “We can sit here and try to hold true to our principles but at the same time we need to be pragmatic.”

Zapata and the Florida Republicans, including Charlie Crist who went from outright opposition to tacit support of a cigarette tax increase, should remember New Jersey:

In 2006, New Jersey raised its already high cigarette tax, thinking it would bring in an extra $30 million a year. It didn’t. Worse, it caused their actual collections to drop by more than $20 million. The tax increase threw the state’s budget off by $50 million, money that had to be made up by other taxpayers. This isn’t unique to the Garden State. Since 2003, there have been 57 cigarette tax increases across the country. In 37 (68 percent) of those cases revenues failed to meet projections.

Look – I don’t smoke. I don’t like cigarettes. I love the restaurant smoking ban in Georgia. But don’t try to balance the budget on cigarette taxes. It won’t work. It’s bad policy.

Tags: cigarettes, Florida, taxes

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Brian Hibbert

I don’t smoke, but I do remember in my youth when friends would drive to MO or some other state with a low or noexistent state cigarette tax, buy a few cartons and bring them back to Illinois, resell them at a profit and still be below the local market price. And that was with a much smaller price differential than is proposed here.

But maybe these Republicans are wanting to raise taxes on cigarettes as an object lesson? Perhaps they think they can show how raising rates reduces revenue?
Dafyd
builder20

Obama is going to be coming to Germany in the next few weeks, and he is landing about 20 minutes from my house, either in Baden-Baden or Lahr. I was thinking of some catchy slogans to great him with, but thought I would fish for some ideas from y’all. So any ideas would be most welcome!
Achance

There are arbitrage schemes set up and one outfit that does revenue bonds for state governments so they can borrow against their future cigarette tax revenues. Alaska is bought into that one but I don’t know when we did it. We piled on the taxes and lawsuits under Knowles (D) so that we have among the most expensive cigarettes in the country. Somewhere along the way we did the bond deal but I don’t know whether Knowles, Murkowski, or Palin did it.

Anyway, every one of those taxpayers is either going to quit or die and since they are disproportionately poor, they’re probably going to cost you a lot of medicare/medicaid money on the way. ‘Course, what they need to do to go along with the cigarette taxes is to similarly tax nicotine patches, gum, and such. For three or four months after I put the cigarettes down I was spending as much or more on patches. I won’t say that the cost was really determinative for me though even when you’re pretty well off, you can feel buying a carton or more every week at $60 or more per carton. Interestingly, the price of patches has exactly tracked the cost of a carton of cigarettes.

Anyway, I haven’t had a cigarette in eight months or used a patch in four or five months, so I’m not helping the children any more.
mom2oneson
bk

They just want to maximize a) government tax income and b) money generated from lawsuits.
Achance

last week and over the weekend. It was a good reminder of why I used to smoke two packs of Winstons a day and go through two and sometimes more fifths of Chivas in a week!

And thank you for the kind words.
USNJIMRET

and possibly some State increase as well, I know that here in Colorado on April 1st the cost of a carton will go up $7.00.
Anyone who has ever looked at what a massive tax increase does to consumption of the thing taxed KNOWS what happens.
Revenues drop.
But for some reason law makers never seem to believe that there will be reduced revenue from a tax increase. Even to amounts LESS then they were getting before the tax increase!
If the State, or Federal Government is determined to outlaw smoking, Just Do It!
But this creation of one program after another, to be funded with soon to be non existent tax revenues…….insainty!
USNJIMRET

and possibly some State increase as well, I know that here in Colorado on April 1st the cost of a carton will go up $7.00.
Anyone who has ever looked at what a massive tax increase does to consumption of the thing taxed KNOWS what happens.
Revenues drop.
But for some reason law makers never seem to believe that there will be reduced revenue from a tax increase. Even to amounts LESS then they were getting before the tax increase!
If the State, or Federal Government is determined to outlaw smoking, Just Do It!
But this creation of one program after another, to be funded with soon to be non existent tax revenues…….insainty!
oldgeezerguy

The feds are already hitting this regressive tax for about the same amount and if he doubles their increase you will at 1.60 a pack total taxes or 16 bucks a carton.

I know plenty of fixed income smokers that will be suffering with that combined increase of about 1.20 per pack or 12.00 a carton more than what they pay for their smokes now.
Addison

You say, “all the data shows us that raising cost of buying cigarettes lowers the use rate, which decreases the revenue generated therefrom.” The first part of this is correct, all the data DOES show that. The inference that this, therefore, decreases the revenue rate is less universally true.

Here are some that show both a decline and smoking and a revenue increase, presumably dependent on whether or not the state hit the sweet spot of raising the tax enough to get the “right” number to quit and the “right” number to pay the higher price.

http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=403
http://www.tobaccofreekids.org/research/factsheets/pdf/0098.pdf (propaganda, yes, but data is culled from the US Dept of Treasury)

and, most of all:

http://hypotheticalmean.files.wordpress.com/2007/09/cctaxrevenue2.JPG

A quote that anecdotally backs up the data in the last link: “California banned smoking in bars and restaurants in 1998 and raised its cigarette tax 50 cents a pack in 1999. Tobacco tax revenue boomed, then started to decline.” (MSNBC)

As one can see (especially in the last link) the cigarette tax is, as you say, nothing to balance a budget on. The results are too small and generally short-lived.

However, it’s certainly arguable that given a correctly calibrated increase in cigarette tax the revenue can certainly go up. The federal tax’s revenue did (even when it started to dip it was still above previous levels).

There are many other factors — restaurant, bar, and workplace smoking bans, notably — that are far more responsible for a decrease in long-term cigarette use than tax levels. Eventually this revenue stream will be killed off by restrictions on tobacco’s use and sale. But in the meantime…

A policy of incremental increases in the cigarette tax rate (as seen in the last-linked item above) provides both higher revenue AND a decrease in smoking. It is regressive though.
Addison

You say, “all the data shows us that raising cost of buying cigarettes lowers the use rate, which decreases the revenue generated therefrom.” The first part of this is correct, all the data DOES show that. The inference that this, therefore, decreases the revenue rate is less universally true.

Here are some that show both a decline and smoking and a revenue increase, presumably dependent on whether or not the state hit the sweet spot of raising the tax enough to get the “right” number to quit and the “right” number to pay the higher price.

http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=403
http://www.tobaccofreekids.org/research/factsheets/pdf/0098.pdf (propaganda, yes, but data is culled from the US Dept of Treasury)

and, most of all:

http://hypotheticalmean.files.wordpress.com/2007/09/cctaxrevenue2.JPG

A quote that anecdotally backs up the data in the last link: “California banned smoking in bars and restaurants in 1998 and raised its cigarette tax 50 cents a pack in 1999. Tobacco tax revenue boomed, then started to decline.” (MSNBC)

As one can see (especially in the last link) the cigarette tax is, as you say, nothing to balance a budget on. The results are too small and generally short-lived.

However, it’s certainly arguable that given a correctly calibrated increase in cigarette tax the revenue can certainly go up. The federal tax’s revenue did (even when it started to dip it was still above previous levels).

There are many other factors — restaurant, bar, and workplace smoking bans, notably — that are far more responsible for a decrease in long-term cigarette use than tax levels. Eventually this revenue stream will be killed off by restrictions on tobacco’s use and sale. But in the meantime…

A policy of incremental increases in the cigarette tax rate (as seen in the last-linked item above) provides both higher revenue AND a decrease in smoking. It is regressive though.
Addison

…the first time I got a server error and I had been logged out (which happens). I checked to see whether the comment had posted, It had not. So I posted again, only to have the original attempt (eventually) succeed.

It’s a long comment, and it disagrees with the post it replies to, and so the double posting is unusually annoying. So, sorry about that.
Addison

…the first time I got a server error and I had been logged out (which happens). I checked to see whether the comment had posted, It had not. So I posted again, only to have the original attempt (eventually) succeed.

It’s a long comment, and it disagrees with the post it replies to, and so the double posting is unusually annoying. So, sorry about that.
Achance

There is NO WAY I’d have been able to quit if it were not for the bar ban here and in Anchorage. Some Doc once told me that if you wanted to quit smoking you had to remember the acronym HALT and never let yourself get Hungry, Angry, Lonely, or Tired. That is so true because any one of those and especially a combination of them will make you reach for that comforting jolt of nicotine.

Back when I was still working regularly, I lived on the road and in hotels and hotel bars. The first ban was on bars that served food and that didn’t change my behavior much. Then the ban was extened to ALL bars and that starts to make a difference because it is such a hassle to go outside; it’s one thing to take a smoke break outside at work, quite another to have to leave a bar where all your conditioning is to be able to sit in a bar with a drink in one hand and a smoke in the other.

The other thing was that even if you were trying to quit, you had to give up both smoking and going out until the bans. I could do OK at work or at home, even in a hotel room without smoking, but I could not sit in a bar without smoking. So, you’d go to the bar and after a few minutes you were bumming a smoke, then buying a pack just to smoke while you’re there and leave behind, then you just keep the pack and leave it in the car or something because you don’t want your spouse or friends to know you’ve failed quitting again. I never had any trouble driving past the 7-11, but I couldn’t sit in a bar. Now that that temptation has been removed, I think I have a forty year habit beat. ‘Course, it may have killed me already, but at least I won’t have to “Tell St. Peter he’ll have to wait/ ’cause I gotta’ have just one more cigarette/”
rick554

I quit smoking when our “leaders” passed SCHIP! lolol Too bad suckers!
janis

I must get in the habit of going to bars. Living in a dry county with the nearest bar some 35 miles away, I have to make up rules for myself if I try to quit–”No smoking in the car”, then “No smoking with coffee”, then “No smoking on the back porch”, etc. Gave up smoking in the house two decades ago. Since this has been one long, cold winter with lots of rain and wind, my smoking habits have taken a hit anyway.

But now that I know the solution, I’m off to the bars to not smoke.
izoneguy

My mother was a 2 pack a day smoker for 30 years.
She is still alive at 69 years old.
She has been in poor health since her late 40′s.
Doctors told her unless she quit she had about 5 years left.
She finally quit at age 49
Today she has about 20% lung capacity.
She is on oxygen 24 hours a day.
Her blood flow is very bad. She bruises very
easily.
I never have smoked. It is hard enough to stay healthy
without poisoning yourself.
To fund childrens healthcare on the backs of smokers is
just – well it is just like a ponzi scheme.

I don’t know the answers but my mother does say
that she wished she had never smoked.
She would have been able to enjoy her
retirement more if she was not chained down
with the oxygen packs.
The_Gadfly

from several years before the tax increase through now, with a control for the number of people residing in the state. My expectation is that by now both total revenue from tax on tobacco and per capita revenue from tax on tobacco are both below the pre-tax number. Legislators go after tobacco for a number of reasons. First off, they get to play the “good guys” who are only taxing vices, so they get to salve their egos. What they don’t like to admit to, is that they also go after these items because they expect them to have highly inelastic demand curves precisely because tobacco has an addictive component. My suspicion is the demand curve is not nearly as inelastic as they think it is over the long term, although for the short term it will be. So for a couple of years they get to bleed money out of people, but eventually a significant portion quit smoking and therefore decrease total revenue in the far out years. Google doesn’t produce anything like the sort of numbers I’m looking for in their top 40 search hits.
clintonformccain

Don’t get me started on the smoking thing. I quit cold turkey a year ago last week after 38 years of active nicotine addiciton. I’ll talk your ear off, but that’s another story. (free resource: www.whyquit.com)

The data does NOT show an increase in quitting. Quite the contrary, the percentage of ex-smokers incresed dramatically until the 1990s when pharmaceutical nicotine became the recommended approach to quitting. Since then, quit rates have stagnated. All of the smoking bans and tax increases of the lsst 20 years have barely put a dent in the percentage of smokers.

The impact on tax revenues is a local issue. Drving out of state is easy in some location, not easy in others. Per capita consumption may have declined (for example I went from 2 packs a day to 1 pack a day when my wife passed a law banning smoking in our house, but so what? 1 pack a day was still killing me).
clintonformccain

Don’t get me started on the smoking thing. I quit cold turkey a year ago last week after 38 years of active nicotine addiciton. I’ll talk your ear off, but that’s another story. (free resource: www.whyquit.com)

The data does NOT show an increase in quitting. Quite the contrary, the percentage of ex-smokers incresed dramatically until the 1990s when pharmaceutical nicotine became the recommended approach to quitting. Since then, quit rates have stagnated. All of the smoking bans and tax increases of the lsst 20 years have barely put a dent in the percentage of smokers.

The impact on tax revenues is a local issue. Drving out of state is easy in some location, not easy in others. Per capita consumption may have declined (for example I went from 2 packs a day to 1 pack a day when my wife passed a law banning smoking in our house, but so what? 1 pack a day was still killing me).
clintonformccain

Here is the CDC survey data. This is the percentage of adults who had smoked and are now ex-smokers, i.e. the percentage of smokers who have quit. As you would expect the percentage increased steadily following the Surgeon General’s initial report in 1964. However, the percentage of ex-smokers hit a wall around 1990 and had barely budged since. There have been small gains in the overall percentage of non-smokers, but those gains have come entirely from fewer teens getting trapped at the start of the addiction cycle.

1965 24.3
1970 33.1
1974 34.5
1978 37.9
1980 39
1983 40.4
1985 44.5
1987 44.3
1990 49.1
1993 49.6
1995 48.6
1997 48.0
1991 49.5
2001 49.2
2002 50.1
2003 50.3
2004 50.6
2006 50.2

It is pretty clear that smoking bans and taxes won’t stop a nicotine addict. Otherwise, we’d be seing increasing percentages of ex-smokers with ever more draconian smoking bans.

Link:

http://www.cdc.gov/tobacco/data_statistics/tables/adult/table_6.htm
Praying

the infamous SCHIP (state’s child health insurance program) – you know, the plan to insure poor children – which is now defined as kids who’s parents make up to $88,000/year, and illegal aliens, and “kids” up to age 30??? (I loved the Glen Beck spoof on this – he said something like “I have one thing to say if I have a 30 year kid living with me: ‘Get out of here and get a job!’”)

It will be interesting to see how that works out for them. Actually, it will be interesting to see how any of this crap works out for them.
clintonformccain

If I’m not mistaken, the SCHIP bill that just passed has a new 61 cent per pack federal tax on cigarettes to pay for the increases in SCHIP coverage.

All things considered, it’s probably not a bad alternative for paying for it. The financial drain on the nation’s health care system from smoking is astronomic. Cancer is just the tip of the iceburg. Heart, circulaton, and stroke are the biggest killers from smoking. Nicotine raises blood pressure and constricts arteries.

I have no objection to smokers paying their share of the health care costs. If they quit in large numbers (which isn’t likely given the mess the government has made of smoking cessation being in bed with the pharma companies), so much the better.
Praying

And it makes total sense to make smokers pay their share of health care costs – but my understanding is that this program is for poor children (admittedly, with the income cutoff of $88,000 for a family of four and maximum of age 30 for a “child”, there may be a number of smokers within the covered population) but the majority of smokers are not the group that receives health care from this program. Some people say nah, raising taxes won’t give people incentive to quit smoking, so the money will keep coming in, others are more doubtful, and the gov’t will have to make up the lost revenue somehow – like by taxing YOU and ME, and the increasingly small number of Americans who pay taxes! It’s another one of those unintended consequences things- I’m just not sure anyone actually thought this through completely, that’s all I’m saying!
Praveen

If smoking is so bad why not ban tobacco? How about Sodium (salt)? How about Cooking Oil? Fast Food? Carbon emissions( car emissions )? Electricity from coal? Alcohol?

Tax it but don’t attach any noble motives. It is a money grab and attempt to get votes permanently?

There is an ad running on Time Warner In upstate NY. Here is how it goes:
“Rich should Pay there fair share. Tax the rich not hard working New Yorkers”.
Another One goes:
“Call Kirsten Gillibrand and Chuck Schumer for voting for Stimulus Bill”

I am sure you find that crazy. You say “I have no objection to smokers paying their share of the health care costs”. I find that like saying “tax everybody else but me”.

Most smokers are aware of health hazards of smoking.

Where does it stop?
clintonformccain

“I am sure you find that crazy. You say ?I have no objection to smokers paying their share of the health care costs?. I find that like saying ?tax everybody else but me?. Most smokers are aware of health hazards of smoking.”

—————–

No. I smoked for 38 years. I never complained about cigarette taxes. Of course, smokers know the health hazards. They are drug addicts. Drug addicts who cost our health care system (i.e. you and me) incredible amounts of money every year. Staggering costs.$10 a pack doesn’t begin to cover the cost. Smoking related illness kills one out of every two nicotine addicts.

Fine with me if we ban nicotine. There are other insecticides that work better. There’s not one legitimate use of nicotine. There would be an instant nicotine black market. Dope addicts won’t quit.
AKSteveB

I believe we can sell the conservative message and bring a lot of the country back to our side, by uniting for a ban on the Designated Hitter Rule in baseball. It is a liberal disgrace. A change in tradition just for its own sake, it goes against the work ethic by allowing pitchers to be only half a baseball player, it is frankly UnAmerican!
manifestdestiny

If sin taxes cause extinction of bad habits why aren’t we using them to solve the drug problem? If you raise taxes on methamphetamine then it will discourage use.

If taxes go up too much on cigarette it will create a market for contraband non-taxed cigarettes.

Both nicotine and alcohol are addictive and serve no or limited medical purpose. Nicotine should be a schedule 1 Controlled Substance like heroin, meth and marijuana. Alcohol which is used to treat methanol and ethylene glycol poisoning, would be a schedule 2 like morphine and oxycontin. The Controlled Substances Act has had a great track record in eliminating drug addiction. So adding alcohol and tobacco to the list of controlled substances should help lower the rates of emphysema and liver cirrhosis. As well as give disadvantaged youth new entrepreneurial opportunities.
Praveen

I was asking you to get over preaching what is justifiable and what is not. You don’t need to call smokers “Dope addicts”. I wonder what you think about coffee. What is the bit about “legitimate use”? Please…..

And you are missing the point of my comment.

“Tax it but don?t attach any noble motives. It is a money grab and attempt to get votes permanently”

“Their share” is a tricky thing…

I can go on and on… but I won’t…

Where does it stop?

RS

EDITOR OF REDSTATE

But they said they weren’t going to raise cigarette taxes

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