Saturday, November 26, 2005

Health Groups' Knee-Jerk Support for Cigarette Taxes Starting to Backfire: Re-Thinking of Cigarette Taxation as a Tobacco Control Strategy is Needed

One of the basic rules I was taught as a tobacco control advocate was that increased cigarette taxes were a good public health policy because they save lives by reducing cigarette consumption. In general, each 10% increase in the price of cigarettes results in about a 4% decline in cigarette consumption.

Recently, however, an unforeseen problem has arisen - one which leads me to question whether health groups' knee-jerk support for cigarette taxes might not be backfiring: namely, the use of cigarette taxes to fund essential government programs has made the government dependent upon cigarette tax revenue and has therefore removed any incentive for policy makers to enact policies that might reduce cigarette consumption.

An article in today's Trenton Times explains that state legislators in New Jersey are considering opposing a state smoke-free workplace law on the grounds that it would decrease cigarette consumption and therefore threaten to reduce cigarette tax revenues and the programs funded by these revenues.

According to the article, David Rousseau, a deputy state treasurer, "said a ban that cuts consumption might force the state to provide updates to bondholders who receive debt payments from the state that are funded by the cigarette tax. ... Most money earned from the cigarette tax is used to help balance the annual budget."

The article explains that: "The debate about banning indoor smoking in public places has focused on making the air healthier, but state fiscal officials wonder if such a ban might also bring about an unintended consequence - slamming state revenues. The state government hopes to get $626 million this fiscal year from its cigarette tax, an amount that makes it the third most important tax revenue source for the state budget, behind only sales and corporate business taxes."

At the same time, a ballot initiative to increase the cigarette tax in California by $1.50 per pack to fund smoking prevention and smoking cessation programs as well as disease treatment is severely threatened because another ballot initiative being promoted at the same time proposes to increase the cigarette tax by $1.50 per pack to provide more money to hospitals.

It is perhaps the precedent that health groups have set by supporting the use of cigarette tax increases to fund government services that has opened the door for the California Hospital Association to propose using the state's cigarette tax as a method of solving hospitals' fiscal woes.

It may well be that the presence of the competing cigarette tax initiatives in California may kill the health groups' measure because it is perhaps unlikely that voters would support two consecutive huge increases in cigarette taxes within a six-month period: "Supporters of the health group bill also recognize voters might be reluctant to back an additional cigarette tax in November if they approve one in June."

Some health groups now find themselves in the difficult position of having to oppose one cigarette tax increase but to support another one, and they are having trouble presenting a rational justification for this position.

According to the San Francisco Chronicle article, the Campaign for Tobacco-Free Kids is one group that is opposing the first (i.e., the California Hospital Association-supported), but supporting the second proposal to increase the state cigarette tax by $1.50 per pack. Yet this is inconsistent with its public campaign to support cigarette tax increases: "Increasing cigarette taxes is a WIN, WIN, WIN solution for states - a health win that reduces smoking and saves lives; a fiscal win that raises revenue and reduces health care costs; and a political win that is popular with the public."

The emerging inconsistency in the anti-smoking groups' support for these cigarette tax measures is, I think, going to hurt the cause because the hypocrisy of the health groups' position is going to become readily apparent to the public.

The Rest of the Story

I think there are two lessons from this story.

First, there are some serious consequences to the use of cigarette tax revenue to fund government programs and services that should lead anti-smoking groups to question their support for these taxes in all but a few special situations (namely: those in which a substantial portion of the revenue will be used to fund smoking prevention and cessation programs and to provide direct benefit to smokers, such as providing support and medical care).

The most serious consequence is the government's dependence on cigarette consumption to fund essential programs and services. While in the short-run, the decrease in cigarette consumption due to the tax increase may be beneficial to the public's health, I think that in the long-run, the creation of an inherent incentive for the government not to enact policies that will reduce cigarette consumption in the future may be a far greater effect that will more than negate the positive public health benefit of the initial tax increase.

Second, the anti-smoking groups' knee-jerk support for cigarette tax increases has now exposed the glaring lack of justification for this support. Because now, the same groups are opposing a cigarette tax increase by other health groups. The in-fighting between the health groups is going to have a negative impact on the public perception of the use of cigarette taxes to fund government programs. And the apparent abrupt change in position of groups like the Campaign for Tobacco-Free Kids is going to make the public question the soundness of the reasoning of these groups in supporting cigarette tax increases.

From a public perspective, the credibility, sincerity, and motivation of the health groups is called into question by newspaper articles such as the one which states: "Health advocates have long supported the idea of increasing taxes on tobacco products, both to discourage consumption and to help pay for health care services" and which then goes on to explain that "several groups, including the California Medical Association, the California Nurses Association, Health Access California and the Campaign for Tobacco-Free Kids, have come out against the hospital-backed proposal."

Had the health groups like the Campaign for Tobacco-Free Kids not been so eager to tax cigarettes for any purpose under the sun, I don't think they would be in the predicament that they face today. Because by being more careful to justify the specific need for the cigarette tax increases in the past, they would have been able to explain in a rational way why one of these proposals is a good one and one is a bad one.

But when you are on record as stating that any cigarette tax increase is a "win, win, win" proposal, you aren't going to look too consistent arguing that in fact, a $1.50 per pack cigarette tax increase is a win proposal while another $1.50 per pack cigarette tax increase is a lose proposal. Instead, you appear to the public, I think, like a group that simply wants to get a piece of the pot.

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