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October 25, 2006 | South Carolina Headlines


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Letís Kick The Cigarette Tax Habit
Jimmy Moore
March 12, 2003

Many of our state Republican lawmakers who ran for public office on the principles of lower taxes and less government are beginning to disappoint me because of their wishy-washy views. Their curiously open support for consideration of an increase in the cigarette tax to fund Medicaid is unseemly and uncharacteristic of the conservative ideals they supposedly stand for.

Although I would not be directly affected by a cigarette tax increase since I am an avid non-smoker (see my article "Kicking Butt On Smoking"), it is abhorrent to place the burden of taxation on a specific group of taxpayers. Cigarette tax advocates say that smokers should bear the burden of taxation since they are more responsible for health problems and are, thus, more susceptible to having health problems.

Using that logic, how about our lawmakers consider having an over-the-hill tax on people over the age of 40 because they are more likely to get sick than people under 40?

Or perhaps we should incur a tax on people over six feet tall (now weíre getting personal!) because they are more likely to bump their heads on objects than shorter people are?

Better yet, letís have an elected official tax to generate revenue to pay for mental hospital coverage for people they tend to drive crazy by their actions?!?!

Why are any of these absurd, but applicable examples for raising taxes any different than having a cigarette tax increase for smokers?

It is simply outrageous! Let's kick the cigarette tax habit!

A study prepared for the Cigarette Tax for Healthcare Coalition released yesterday concluded that private health insurance premiums may increase 4-9% if Medicaid is not properly funded. The study also states that the poor and uninsured would still receive the health care benefits they need, but that there may be delays because of inadequate funding.

While I do not dispute the facts of this study (in fact, I agree with most of them), I do not see any conclusive evidence or recommendations from the study that indicate a cigarette tax increase is the ONLY way to make up the shortfalls in Medicaid funding. Other options need to be explored.

The main argument being submitted by cigarette tax increase advocates is that South Carolina stands to lose over $3 in federal matching funds if Medicaid is not funded properly. While everyone agrees that adequately funding Medicaid is critical to South Carolina, other sources of income must be considered that do not include an increase in taxes.

Yesterday, the state House of Representatives began consideration on an Appropriation Bill, H3749, that did not include an increase in the cigarette tax. But Republican leaders in the House have promised to give cigarette tax proponents an opportunity to make their case before the General Assembly separately after the budget has been passed. If members of the House approve the cigarette tax increase at that time, then it would be added to the 2003-2004 budget.

The cigarette tax debate is an intriguing one to me since most legislators, both Republicans and Democrats, have pledged not to create any new taxes and/or are opposed to creating or increasing taxes.

Rep. Bobby Harrell, House Ways and Means Committee Chairman, is one of the chief opponents of a cigarette tax increase.

"I personally have a concern about raising taxes generally. But I have a further concern about targeting people (for tax increases) because polls say it is okay," Harrell told The Greenville News in January 2003.

Unfortunately, proponents of raising the cigarette tax from 7 cents to 60 cents claim that it is the only way to protect the poor and those struggling with rising health care costs. They also conclude that increasing the cigarette tax would discourage teenagers from taking up the smoking habit. But this is not necessarily true.

Kevin McCarthy, president of the Arizona Tax Research Association, found that although dramatic increases in the cigarette tax are politically popular because they are sold to the public as a necessary means for funding essential government programs (such as Medicaid) while simultaneously discouraging people from consumption, it is a fact that as tax rates increase on cigarettes, tax collections actually decrease.

But, donít assume that a correlating reduction in consumption occurs. Consumers will always shop around to find the best price on whatever products they want to purchase. In other words, the money goes elsewhere.

That is exactly what state Rep. Herb Kirsh is concerned about. He told The Herald recently that a cigarette tax increase will severely hurt businesses in his district.

"If we go up 63 or 70 cents (on the cigarette tax), all the convenience stores in our area -- their business is going to be hurt. And merchants in my area already suffer because North Carolina has only a 2 percent food tax."

Looking at Arizona, since the first full year of implementation of that stateís 40-cent cigarette tax increase in 1994, there has been an overall decrease in tax revenue of $13.2 million.

Governing Magazine columnist Alan Ehrenhalt wrote an excellent article in September 2002 on the cigarette tax issue. He highlights the example of New York City as a case study for explaining why increasing the cigarette tax is a poor idea for states to consider in the long term for raising revenue.

Ehrenhalt noted that since the new $1.50 increase in the cigarette tax became law in July 2002, cigarette sales in New York City have decreased by 50%. This does not mean that people have suddenly decided to quit smoking. On the contrary, smokers who became outraged at the cigarette tax increase have become wise consumers by visiting nearby cities or purchasing their smokes on the Internet.

"There are times when so-called 'sin taxes' are treated mostly as a fiscal proposition, others when they are portrayed largely in moral terms...If government's main goal is to make money off of tobacco and alcohol, it needs to have people drink and smoke more, not less,Ē says Ehrenhalt.

Nevertheless, a coalition of cigarette tax supporters will be conducting a rally in support of raising the cigarette tax at the Statehouse in Columbia today at noon.

While Medicaid funding should be preserved for the sake of those who need medical attention, we donít need to do it with a cigarette tax increase. I urge state lawmakers to come up with creative revenue-generating ideas to continue the federal matching funds coming to South Carolina. We elected you to do a job. Now you need to do it with your principles still intact!

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