Tuesday, November 22, 2005

More Dangers of Supporting Increased Cigarette Taxes to Fund Government Programs Revealed

According to an Associated Press story, Hollywood director Rob Reiner has threatened to oppose a ballot initiative that would increase the state's cigarette tax because it would reduce cigarette consumption, and therefore decrease cigarette tax revenue that is allocated to a pre-school education program that he championed in a 1998 ballot initiative:

"Hollywood director Rob Reiner warned the California Hospital Association Friday to withdraw or rewrite a ballot proposal it's pushing for 2006, saying it threatens to snatch up to $34 million a year from needy preschoolers. Reiner, a longtime activist, championed a 1998 ballot proposal slapping a 50-cents-a-pack tax on cigarettes to fund health and education programs for children up to 5 years old, now known as First 5 California. In his letter, Reiner argued the hospital proposal, which calls for a $1.50 tax on each pack of cigarettes to fund emergency rooms and other health programs, would slash First 5 funding. If the state increased cigarette taxes as proposed by the hospitals, purchases would inevitably decline as smokers shop elsewhere for lower prices or give up the habit. If fewer cigarettes are sold in the state, tax collections will decline. In turn, First 5 would receive less money."

"Reiner, who finds himself in the awkward position of arguing against a tax increase that could decrease smoking, pegged the loss at $34 million. 'We all share the goal of reducing the harmful effects of smoking and improving access to health care,' Reiner wrote. But 'an initiative which cuts funding for children's health and early education is bad for California.'"

The Rest of the Story

This story reveals one of the problems with creating a government dependence on tobacco revenues to fund needed and valuable public programs. It removes the incentive to take any government action to reduce tobacco use because such a reduction would decrease cigarette tax revenues and therefore threaten these public programs.

Here, we have the absurd and ironic reality of Rob Reiner arguing that an initiative that would reduce cigarette consumption is bad for California because it would cut funding for children's health and early education.

The fact that the cigarette tax was increased in 1998 to pay for early childhood education is now a major obstacle in the way of government adoption of a policy to reduce cigarette use. The incentive not to threaten funding of government programs is so strong that even a supposed crusader for public health is arguing against such a policy.

This story is an illustration of why tobacco control advocates and groups should be hesitant to support every proposed cigarette tax under the sun. It is not, as the Campaign for Tobacco-Free Kids has suggested, a win-win-win situation. In fact, it may well be a lose situation because by increasing government dependence on tobacco revenues, it removes any incentive for government action to reduce tobacco consumption.

This story also illustrates the folly of the proposal by Physicians for a Smoke-Free Canada for the government to buy out the tobacco companies and transfer them to a non-profit entity. The proposal would create a huge financial dependence of the government on tobacco revenue and would remove any incentive for policies to reduce tobacco consumption.

The rest of the story suggests that the rabid enthusiasm of anti-smoking groups for any and all cigarette tax hikes is irresponsible public policy. It may look good in the short-term, but in the long-run, it is going to come back to haunt us.

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