Wednesday, October 4, 2006

Tobacco Tax Increase

I have been discussing Initiated Measure 2, the proposed $1 a pack increase on cigarettes that is being voted on in November on a post on the SDWC and via email with a supporter of the increase. The emailer was trying to point out to me the fact that many supporters of the legislation are touting as the reason this bill is a good idea (emphasis added).



We have language in code which sets a tobacco tax and which puts all the money from the tobacco taxes in that chapter of code, into the general fund. That current tobacco tax generates about $30m and puts it all in the general fund.


This initiated measure, this new language increases those same taxes in that chapter. It leaves the general fund revenue neutral, in that the $30m generated currently and which will be generated even if this measure fails still goes to the general fund.


But the increase, the lift if you will in tobacco taxes generated, will be dedicated as the proponents describe. Essentially, the first $5m goes to cessation programs as they’re called, and the rest distributed among the funds.



If you just go by what the emailer discusses, the tax would be a great source of revenue for cessation programs that could be used to stop young people from starting smoking and for getting smokers to quit. What isn’t mentioned is something that I commented on over at PP’s and in response to the email I quoted above.


Under the current tobacco tax, South Dakota received around $30 million last year that goes into the general fund and proponents of this bill say that the next 5 million would go towards prevention programs. The new tax if passed would first and foremost guarantee that the $30 million that the state receives remains in place and any additional revenue would be divided first to the cessation programs and then to other state programs. What isn’t mentioned is how much the revenue from the tobacco tax has been decreasing year after year due to the ever decreasing number of smokers and how that number will continue to decline.


What happens when cigarette sales decrease? For one, the state collects less in tobacco taxes. With less coming in the state loses revenue, that $30 million cut mentioned above, and what this tax actually will do is make sure that even though fewer packs are being sold the state still gets it money.


The proponents like to tout the $5 million for cessation programs but how long will that money be generated if ever? My problem with this legislation has nothing to do with the increase in the tax itself, I am more concerned with the fact that it is being touted as some kind of noble effort to get people to either not start smoking or to quit altogether, that isn’t the purpose. The main reason for this measure is to ensure that South Dakota keeps getting it’s money from smokers and to make it sound more palatable, they threw in the $5 million dollar bone that may or may not ever exist.


One thing you notice is that many would like you to believe that their motive for this is to prevent kids from smoking, but you rarely if ever hear anyone trying to increase the tax on alcohol to prevent underage drinking. Last time I checked, underage drinking results in many more deaths among our youth than smoking does so where is the call for increased taxes on that? Of course there are none because drinking is currently more sociably acceptable and many more people partake of that vice.


So when the state needs to increase or maintain revenue they target a vice that most people wouldn’t have a problem increasing taxes on, hence the real purpose of Initiated Measure 2.


I personally could care less if this measure passes but call it what it is, an increase whose sole purpose is to insure the state gets its money and not some grand gesture to get people to quit smoking. If that were it’s purpose, the $5 million would be guaranteed upfront before any talk of the $30 million for the state’s coffers.

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