Florida Proposes to Balance State Budget by Increasing Cigarette Excise Tax; Levy is Being Called a "User Fee"

Faced with a dismal financial situation, the state of Florida is considering using an increase in the state's cigarette excise tax to balance the budget. However, reluctant to call the proposal a "tax," lawmakers have inserted into the legislation language that terms the source of the revenue stream a "user fee."

According to an article in the Ocala Star-Banner: "While the Legislature has increased a myriad of fees on everything from boating to court costs in recent years, they generally refuse to tackle anything associated with the word 'tax.' Seeking to exploit that is a not-so-subtle provision in Waldman's bill that changes the 'cigarette tax' to a 'user fee,' an obvious move to avoid the political poison of debating a 'tax increase.'"

Florida is apparently facing a $2 billion budget shortfall and the idea being floated - a 50 cent per pack cigarette tax increase - would raise between $400 million and $500 million.

The proposal is being supported by the American Cancer Society, the American Heart Association, the American Lung Association and the Florida Hospital Association.

The Rest of the Story

Don't be hasty on this one. While it may appear - at first glance - that increasing the cigarette tax is a perfect way to raise the revenue needed to balance the budget, a closer look reveals that this could be a disastrous idea.

The chief problem with the proposal is that it makes vital government programs dependent upon continued cigarette consumption for their solvency. By definition, it ties the future fiscal status of the state to the health of its cigarette market. If cigarette consumption falls, an automatic budget shortfall is created. Thus, the proposal makes the state dependent upon continued cigarette consumption in order for it to sustain vital government programs.

This has the further disastrous effect of taking away any incentive for the state government to implement interventions to seriously reduce smoking rates and it makes the state a fiscal partner with the tobacco companies, something Big Tobacco could otherwise only dream about.

To see how disastrous such a proposal might be, one need only look so far as the Master Settlement Agreement, which created a host of cigarette sales-dependent government programs in the states, thus making the states fiscal partners of Big Tobacco. The state Attorneys General even went so far as to go to court to protect the financial interests of their newly-found tobacco industry partners when the companies were threatened with damaging litigation because of their wrongdoing. The Attorneys General and other state-level government officials helped bail the tobacco companies out of a number of potentially devastating messes created by what otherwise might have been very successful litigation.

Because of the Master Settlement Agreement, the tobacco companies have had no greater friends in the world than the 46 states which entered into that agreement.

So while health advocates in Florida might initially think that tying a tobacco tax increase to critical government programs is a good idea that will improve the public's health, in the long run, it may actually serve to institutionalize tobacco use in the state of Florida and to put an end to any serious prospects of substantially reducing tobacco use in the Sunshine State.

An editorial in the Palm Beach Post articulates just this argument: "The Legislature could tee up lots of good responses to Florida's financial problem. Unfortunately, a bad one is the leader in the clubhouse. That would be a higher tax on cigarettes. As always, a sin tax is the last refuge of politicians who don't want to annoy people with money or face the big issues. ... using a sin tax to fund recurring expenses creates an adverse incentive - the revenues from the sin tax are inversely related to the public policy goal of reducing and deterring tobacco use."

The same argument is reflected by the title of a recent column in the St. Petersburg Times: "Smokers: Time to Inhale to Help the State."

While I support cigarette tax increases for the purpose of reducing smoking and raising revenues specifically for smoking-related purposes, including programs that directly benefit smokers (such as research into the prevention and treatment of smoking-related diseases, treatment for those diseases, and other services - such as cessation programs - for smokers), I think there are potentially dangerous public health implications of using cigarette taxes to balance budgets. When these taxes are used to finance vital government programs, it creates a dependence on the part of the government on continued cigarette consumption.

To illustrate what might be viewed as the absurdity of having critical government programs funded by smokers, I have designed a T-shirt that smokers in Florida can wear if the cigarette tax increase is enacted. I am hopeful that sales of this T-shirt will provide me with enough money to live up to the accusations of some of my colleagues that I am being bankrolled by Big Tobacco to express these radical opinions.