No Need to Raise Tobacco Taxes
Whenever there is a need to increase government revenue, one group can always be counted on as an easy target – tobacco users. While it is stressed that we need to be tolerant of every other lifestyle, it is somehow OK to demonize people who use tobacco products. Even though they are an easy target, legislators should resist the temptation to increase their taxes as a way to raise revenue or discourage their habit.
The latest salvo against tobacco users came when a coalition of liberal interest groups proposed raising taxes on cigars and smokeless tobacco. With the state of Ohio facing budget deficits, the timing seems right to target tobacco users. Part of their justification for higher taxes involved fairness – people who use these products cost society so they should pay their “fair share.”
This notion of fairness is legitimate in the debate about how to levy taxes targeted at certain products. If the users of these products impose a cost on society, the government should try and recoup that cost through excise taxes. Otherwise the government should only levy taxes that are broad-based so that everyone – not just an unpopular minority – bears the cost of government services.
Anti-tobacco activists often say that smokers impose a huge cost on taxpayers. In announcing this push for new tobacco taxes, for instance, the director of advocacy for the American Lung Association of Ohio claimed that tobacco usage costs the state’s Medicaid program $575 million annually. As she put it, “We've got to put money into preventing the problems that are causing our state budget to be so high, and one of those is definitely tobacco.”
It is certainly fair that people should pay for the costs they impose on society. Tobacco users are already doing that, however. Studies indicate the burden smokers place on taxpayers could be oft-set by adding about 32 cents to a pack of cigarettes. Since Ohio taxes cigarettes at $1.25 a pack, the smokers of Ohio are paying for more than their fair share.
Cigars and smokeless tobacco products are also taxed heavily compared to the cost they impose on society. Illnesses from cigars and smokeless tobacco such as chewing tobacco cost taxpayers almost nothing. These products are just not as dangerous as cigarettes. Because of this, they should have no special taxes levied on them. Instead, they have an onerous ad valorem tax imposed by the state that taxes these products based on their price. This distorts the market and unfairly penalizes high-end products.
In short, tobacco users already reimburse the government for any costs imposed on state health systems. If activists were really interested in fairness, they would be pushing for a reduction in tobacco taxes.
Of course, fiscal fairness is probably only one part of the rationale to increase tobacco taxes. Many interest groups want to see taxes raised in order to discourage tobacco usage. It is an improper use of the tax code to try and affect social policy, though. Taxes should be levied to raise revenue for government obligations, not as a way to force people to act certain ways.
Besides being an improper use of the tax code, raising taxes on products to discourage their usage also has unintended consequences. Activists do not seem to realize that not all tobacco products are equally unhealthy. While all tobacco products pose some health risk, smoking cigars or using chewing tobacco causes far fewer health problems than smoking cigarettes. By raising the cost of these less dangerous products the anti-tobacco activists may well cause some people who used these products to satisfy their tobacco habit with cigarettes.
Like the majority of Americans, I do not use tobacco products. No matter what happens with this proposal, it will not affect me. But the principle involved here – raising taxes on unpopular segments of society and using the tax code to change behavior– affects everyone. It is easy to enact bad public policy when only a small number of people are being hurt. The type of thinking behind that bad public policy damages the freedom of all of us.
Marc Kilmer is a policy analyst with the Buckeye Institute for Public Policy Solutions, a research and educational institute located in Columbus, Ohio.
