Monday, January 05, 2009

Use of Cigarette Tax Revenue from Increased State Excise Tax to Fund Critical Government Programs Appears to Be Major Theme in 2009

The strategy of using increases in state cigarette excise taxes to fund critical government programs that would otherwise not be funded due to state budget shortfalls appears to be a major theme of 2009. Over just the past two weeks, for example, there have been proposals in Virginia and Arkansas to use cigarette tax increases to help balance the state budgets and allow funding for critical government programs.

Public health groups have cast these proposals as "win-win" policies that reduce cigarette consumption while producing needed revenue.

The Rest of the Story

There is another side to the picture, however. By tying critical government programs to cigarette tax revenues, policy makers are actually making these vital programs - and thus the state budget and economy - dependent upon continued high levels of cigarette consumption. The generation of this perverse incentive - which will discourage state policy makers from taking any action that would seriously threaten cigarette consumption - is, in my opinion, a public health disaster whose harms far outweigh any short-term benefits of the cigarette tax increase.

We have already seen the degree to which state governments will go to protect Big Tobacco once their budgets have become dependent upon continuing high levels of cigarettes sales. A large contingent of Attorneys General actually went to bat for Philip Morris in Illinois, filing an amicus brief to help the tobacco giant from having to pay the bond that would have otherwise been required for it to appeal its loss in a "lights" cigarette lawsuit. The Attorneys General thus helped save Philip Morris literally billions and billions of dollars -- all because the states were afraid that their payments under the Master Settlement Agreement might be threatened.

In Florida, state government officials and legislators went to bat for all the tobacco companies, changing the law to avoid them having to post billions of dollars of bond to appeal the $145 billion verdict against them in the Engle lawsuit. Once again, state lawmakers were acting to protect the state's financial interests, which were seen as being potentially threatened if tobacco settlement payments were to decline.

Making the government dependent upon cigarette revenue for critical programs that should be funded from other sources is the last thing in the world that we should want from a public health perspective. Doing so is truly creating a public health disaster. A healthy environment for tobacco control cannot flourish if these perverse incentives exist.

Moreover, these taxes are regressive and they put the burden of balancing state budgets on the very poorest of the state's citizens. An editorial in the Fredericksburg (Virginia) Free Lance-Star summarized this argument quite nicely, referring to Governor Kaine's proposal to increase the state cigarette excise tax by 30 cents per pack to balance the state budget:"let's recognize that Mr. Kaine's proposal represents a kind of classism. Cigarette smokers generally occupy the lower economic strata, which means that few of them inhabit the social sphere of governors and of the business and journalistic elites with whom the political class hobnobs. A cigarette tax, in short, is a tax on "them," not "us." Elites still like their microbrews, their merlots, and their double-malt Scotches, which is perhaps why Mr. Kaine isn't pushing higher taxes on another socially problematic substance, alcohol."

The editorial is right. If these government programs are so critical - and if they benefit all of society - then we should not be singling out smokers to bear the burden of paying for them. The reasons for burdening smokers are chiefly political - state politicians lack the guts to make the wealthier (and more politically powerful) segments of society pay their fair share. It's far easier to take advantage of smokers, who are quickly coming to represent an easily oppressed social class in American society.

So not only do these cigarette tax proposals represent poor public policy, they also represent political cowardice.

As I have argued before, if smokers are to be asked to shoulder the burden of a tax increase, then the revenues should be used for purposes related to smoking and smokers themselves should stand to potentially benefit directly from the programs and services offered. Using a "sin" tax on cigarettes to pay for anti-smoking education and prevention programs, research and treatment of smoking-related diseases, and smoking cessation services makes sense and represents fiscally sound policy that is also equitable. But asking smokers to shoulder the burden to balance our state budgets every time the economy takes a hit is neither fiscally sound nor is it fair.

A letter to the editor in this month's issue of the American Journal of Public Health argues that anti-smoking groups are misguided in promoting cigarette tax increases in order to coerce poor smokers to quit. David Ahrens of the Population Health Institute in Madison, Wisconsin argues that: "The Center for Tobacco Free Kids, an advocate of higher tobacco taxes, estimates that only 3% of the Master Settlement Agreement and tobacco excise taxes is used for tobacco control. Inclusion of the additional $7 billion from the federal excise tax would diminish the proportion spent on tobacco control to 2%. Furthermore, only a fraction of those funds are used to assist low-income smokers to help quit smoking. For tens of millions of smokers who want to quit, poorly funded tobacco control programs offer little assistance. Unfortunately, many of these same programs advocate for tobacco taxes under the misguided notion that high prices will economically coerce poor smokers to quit. If we are to believe our own science, that smoking is addictive, we must recognize the extent to which the primary result of highly priced tobacco products further impoverish a substantial portion of low-income tobacco users. This should be as much of a concern of public health advocates as the ongoing tobacco epidemic among the lower classes."

Thus, it could accurately be argued that cigarette tax increases have as a primary effect the further impoverishment of already low-income smokers. The policy will therefore exacerbate existing health disparities related to income, which is opposed to one of the main goals of the Healthy People 2010 objectives for the nation.

In Arkansas, state legislators and an anti-smoking group are apparently suggesting that the state increase its cigarette tax by 50 cents per pack to fund a new statewide trauma system. This would create an absurd situation in which treatment of trauma in the state of Arkansas would be done thanks to the generosity of smokers who choose to smoke rather than to quit. Quitting smoking would put the state's trauma treatment system in jeopardy!

I plan to test-market my newly designed T-shirts in Little Rock this week:

"I Support Treatment for Arkansas Trauma Victims: I Smoke and I'm Not Quitting."

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