Posted on Tue, Sep. 02, 2003


Cigarette taxes another area where we're out of step



THIS SUMMER, THE state of Nevada increased its cigarette tax by 45 cents, to 80 cents per pack. In so doing, it became the 31st state to increase the cigarette tax in the last year and a half.

Here in South Carolina, it was easy -- even for the overwhelming two-thirds of us who supported raising our own rock-bottom cigarette tax -- to get caught up in the legislative rhetoric about protecting the public from "massive tax increases" and not singling out a discriminated-against minority to shoulder the burdens of the entire society. The fact that this was so easy made it even easier to forget how far outside the mainstream our state continued to float when the S.C. General Assembly refused to raise the cigarette tax this year.

Louisiana. Maryland. Tennessee. Georgia. (Fun fact from Georgia: When the tax went from 12 to 37 cents a pack, newspapers reported that retailers were charging an extra $2 a pack.) And on and on for 31 states. Not just the tax-happy Northeast. Not just the loony left coast. Thirty-one states, from sea to shining sea.

While 31 other states were raising their cigarette taxes, we continued to collect just 7 cents per pack -- far less than a penny a cigarette. Less than the tax in every state except Virginia, Kentucky and North Carolina. Hardly enough to justify even collecting the tax.

South Carolina's budget crisis would not be over if the Legislature had raised our cigarette tax to the national average. We would still be facing mid-year budget cuts -- again. We would still be facing more budget cuts next year. We just wouldn't have had to cut quite so deeply this year, which means the next two rounds of cuts wouldn't have been quite as difficult. If we join the majority of the country and raise our cigarette tax next year, it will not dig us out of our financial crisis; it will merely ameliorate the pain.

The greatest benefit of a cigarette tax is and always has been its impact on teen smoking. The studies are clear and consistent: Higher cigarette taxes mean reduced teen smoking. That's illegal teen smoking, the type the cigarette companies say they also want to stop.

The secondary benefit is the one you get anytime you catch a per-item tax up with inflation: bringing your tax system back into line with what it was intended to be. You'd have to raise our tax to 42 cents a pack just to tax cigarettes at the 1977 level.

The fact that all the other states are raising their cigarette tax -- while making dramatic cuts to their budgets and making few if any changes to the taxes that automatically adjust for inflation -- just demonstrates how radical our legislators are in their determination to protect their friends in the cigarette industry or cling to an anti-tax mantra in the face of overwhelming support -- and logic -- for a selected tax increase.

Oh, but tax policy shouldn't be used to influence behavior, you say? OK. Then stop giving tax breaks to businesses that bring lots of jobs to the state. Stop giving tax breaks designed to lure wealthy retirees to the state. Get rid of all the sales tax exemptions, which were passed to encourage a given type of behavior.

Tax policy has always been used to influence behavior. And the excise taxes on cigarettes and alcoholic beverages were among the very first examples of that type of behavior manipulation. The problem with our cigarette tax isn't that it influences behavior. It's that it's so out of date that it doesn't influence behavior the way it was intended; it no longer serves as a deterrent to smoking. On top of that, it doesn't generate much revenue. And in this state, we need more of both.





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