Wednesday, April 27, 2005

Concern for Ohio's Smokers?

John Byczkowski of the Cincinnati Enquirer uses some tortured logic against Governor Taft's tax reform plan which includes increases in cigarette taxes. (Taft plan gives - and takes away):

...But critics find several problems with Taft's tax plan. First, while it cuts income taxes by 21 percent, it makes up for those cuts with higher taxes that disproportionately affect the poor. People earning less than $25,000, for instance, are twice as likely to be smokers as people earning more than $50,000...

Later in the article Byczkowski details that cigarette taxes are expected to increase to $1 per pack from 55 cents. This would result in an additional $46.80 per year for the smoker who buys two packs per week.

Porkopolis, being libertarian minded, is agnostic with respect to fellow citizens desire to deliver carcinogens to their lungs. However, cigarettes cost the State of Ohio in a big way.


Consider the revenue expected on the increase in cigarette taxes. From page D-13 of the proposed Ohio Budget Special Analyses document (found on the Ohio Office of Budget and Management (OBM) web site) is this projection:

The administration proposes increasing the cigarette tax by $0.45 per pack to $1.00 per pack, increasing the tax on other tobacco products from 17% to 30%, and doubling taxes on alcoholic beverages other than spirituous liquor. These changes are projected to bring in about $350 million a year by FY 2010 (the annual revenue gains actually decline rather than grow because of long-term declines in smoking).

$350 Million is a lot of money and not all of it is from the cigarette tax. But for arguments sake, let's say that it is. A search of costs incurred by the State with regard to cigarette smoking reveals that the Campaign for Tobacco-Free Kids claims that the annual Medicaid costs attributable to smoking are $1.3 Billion. The site does not reference any official Ohio statistics. But, let's say they're off by 50%; that would be 'only' $650 Million then. Even allowing for this generous fudge factor, annual costs associated with smoking for the State are almost twice what is projected to be collected in the additional tax!

The article could have easily made the case that the increase in the cigarette tax was too small!


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