Published: February 16, 2007 10:41 am            

Cigarette tax can achieve only one goal

From 2000 to 2006, only twice did a state legislature opt to raise its cigarette tax by $1 per pack — Maine in 2001 and Montana in 2005. This information is brought to us by the Federation of Tax Administrators, which also tells us that, as of Jan. 1, 2006, Iowa’s 36 cents per pack ranks 42nd in the country, tied with Louisiana.

(In case you’re wondering, Rhode Island is first with $2.46 per pack, South Carolina is last at 7 cents per pack).

Following the lead of new Gov. Chet Culver, the Iowa Legislature seems poised to follow suit and increase the cigarette tax in Iowa by $1 a pack. The Senate Ways and Means Committee has approved the measure on a 14-3 vote, sending it to the full Senate for debate.

Culver asked for the increase in his budget message. Although Democratic leaders initially resisted the full dollar, they appear ready to accept Culver’s request at full value.

The $1 tax increase would bring in roughly $130 million, according to state estimates, which Culver wants to use to expand access to health coverage. But anti-tobacco activists are happier about the potential impact on the number of people who smoke, hoping the extra cost will discourage people from continuing their addiction or, in the case of teens, make smoking too costly a habit to begin.

As we have argued before, the two arguments are mutually exclusive. If the state raises the cigarette tax to generate money for health care, then it needs people to continue smoking at exactly the same rate as today. Otherwise, the money will dwindle and something else will be needed to prop up that portion of the budget.

Conversely, people who want the tax to increase to help reduce the number of smokers ought not to care where the additional revenue goes, unless they advocate it be funneled toward anti-tobacco activity such as support groups, public service advertisements and literature.

Another part of the debate, at least for those of us in border communities, is the impact the tax increase would have on retailers. The concern specifically is for the mom-and-pop stores that sell cigarettes, lottery tickets and gasoline, although a large grocery chain certainly could feel the impact of less customers.

Jumping to $1.36 per pack would move Iowa close to the top 10 nationwide. Pennsylvania sits at $1.35, Hawaii at $1.40 (where they don’t have to worry about bordering states). Yet tiny Rhode Island still charges $2.46 per pack. A state that is 37 miles wide and 48 miles long must have some of its residents bolting to nearby states for cheaper smokes, yet the tax remains sky high.

Closer to home, Illinois’ cigarette tax is 98 cents per pack, though counties and cities may add an extra dime. Minnesota checks in at $1.23, South Dakota at 53 cents, Missouri at just 17 cents (cities and counties can add 4 to 7 cents) and Nebraska at 64 cents per pack.

With such a wide disparity, we can understand how the attitude in Des Moines might be to just to the best thing for Iowa and let the other states do what they will. And really, that’s not a bad attitude. But there are many, many factors at play, and whatever the decision ends up being, more than a few people will be upset.

Simply put, cigarette taxes are popular because less people smoke nowadays. Lawmakers can raise the sales tax and say “no one’s forcing these people to buy cigarettes.” But if the smokers truly do give up — or go elsewhere — and the tax revenue goes away, what else will need to be taxed to make up the difference, or what else will be taxed in the name of public health? (“No one’s forcing them to buy Ho-Hos and Twinkies”).

All we’re asking is for lawmakers and the governor to be up front about their plans. If they want to raise more money for health care, fine. If they want people to quit, fine. But it is time for everyone to acknowledge that both goals cannot be met simultaneously.

        

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