Monday, February 09, 2009

The One recently signed the State Children's Health Insurance Bill, which will be funded by a $1/pack hike in cigarette taxes. I thought Obamessiah was The Smart Presdident™! I thought this was a President--and a party--that cared about the poor in this country. Looks like I was wrong on both counts.

The Democratic Party has long opposed regressive taxes, those taxes that a a proportionally larger burden on lower incomes that high incomes. Except when it comes to excise taxes, like gas taxes and cigarette taxes. Then they all want the Poor and lower incomes brackets to pay more than their fair share.

Here's something I wrote in 2003, so some of the links may not work, but the facts remain the same:

A news story out of Austin reveals that a public policy wonk has decided that raising the excise taxes on cigarettes in Texas to $1.41 per pack (from $.41 per pack) will "reduce smokers, cut health care costs and help finance public schools" by generating $986 million in new revenues.

Bull! It will reduce smokers. Sure there will be a short-term gain in revenues, but if the number of smokers decrease, then the revenues will too.

The Centers for Disease Control released a study that concluded a 10% increase in excise taxes results in a corresponding 10% decrease in consumption.

Meanwhile, the State of Texas has been using its share of the tobacco settlement to fund anti-smoking programs, and these programs have been fairly successful. According to the State of Texas Fiscal Size Up 2002-2003 in 1998 the State collected $623.6 million in excise taxes. In 2003, the expected revenues are $562.6 million. That is a 10% decrease in revenues. A new study by the CDC, trumpets the fact that anti-smoking programs work!

The CDC recommends stiff tax increases, and increased funding for anti-smoking programs.

So here we have a guy that says raising cigarette taxes will reduce public health care costs and fund public schools! Wow! What a great tax!

There is a group called Trust for a Smoke Free Texas who advocate this plan to raise revenue, even though they want this revenue source to dry up! On the page that has a report on this latest tax proposal they show a woman carrying a tray with a bottle of beer and an empty glass. What are they going to go after next, I wonder?

The only way this tax increase will work is if every Texas resident is required to buy a pack of cigarettes every month!

Sure enough, I was right! In December of 2006, citing a decrease in tax revenue funding the state's children's insurance program, and fund education, Texas AGAIN raised tax rates to $1 a pack. Note in the article that the State expects a significant drop in tax revenue in 2010. According to an opposing study, there will need to be another 22 million smokers to fully fund the SCHIP.While I concede that the study may be overstating the number, it is, in essence correct. But what will happen to the States?

Already there are states struggling with a decrease in excise tax revenue. The Center for Science in the Public Interest had a talking paper suggesting this wasn't a bad thing, but if the states need the money they could raise their tax "a few cents" to recover the income. I want to know what they're smoking!

Cigarette sales are declining 2-4% a year. A tax increase will accelerate that decline. Health care costs rise 8-10% a year. This will also contribute to a rising unemployment rate as tobacco shops close, adding more people to the SCHIP, increasing the rise in health care costs. Currently, the Federal and State governments get 50% of the price of a pack of cigarettes in taxes, and they can't keep up with health care costs. What will happen when a pack of smokes is 99% tax?

Once more we see our elected officials playing Bread and Circuses to divert us from the real problems.