BuckeyeBlog

From the Wall Street Journal:

Lobbyists for industry and labor are gearing up to add costly proposals Tuesday to the Senate’s nearly $890 billion economic stimulus plan.

Florida citrus growers, California wine growers and a range of agricultural interests are pushing a tiny change that would allow farmers to more quickly depreciate new fields. High-tech and pharmaceutical companies want to save billions in taxes by including a plan that would allow them to bring overseas profits back home at lower tax rates. Labor unions are pressing Congress to make sure that new government funding for green technology results in jobs with good pay and benefits for workers.

And, of course, Ohio is getting national attention for its elected officials who are just salivating at the prospect of all kinds of new money pouring into their hands. Can anyone really say this is a stimulus bill any more? Why don’t Congressional leaders just come out and call it the spending bill that it really is. As I mentioned here, these projects and tax breaks may be worthwhile, but they aren’t stimulus.

What state is declining fastest, according to Forbes?

The turmoil of the mortgage market granted a temporary reprieve from hearing about the woes of America’s Rust Belt. That doesn’t mean things are better. Despite a decade of national prosperity, the former manufacturing backbone of the U.S. is in rougher shape than ever, still searching for some way to replace its long-stilled smokestacks.

Where’s it worst? Ohio, according to our analysis, which racked up four of the 10 cities on our list: Youngstown, Canton, Dayton and Cleveland. The runner-up is Michigan, with two cities–Detroit and Flint–making the ranking.

But don’t worry, state leaders are taking care of pressing issues, like banning payday lending. Of course, they did pass an “economic stimulus” bill that spreads around money to politically-popular projects and saddles future generations with debt. Too bad they aren’t doing something to actually address the state’s problems, like reducing Ohio’s increasing tax burden on individuals and businesses.

The folks at the American Lung Association’s Ohio chapter are calling for an increase in taxes on tobacco products such as smokeless tobacco and cigars in order to fund their anti-tobacco efforts. This comes on the heels of the Governor and General Assembly de-funding the Ohio Tobacco Prevention Fund and using its money for “economic stimulus.”

But can increased taxes on these products be justified as anything other than anti-smoking activists looking for ways to keep their jobs? I discuss this issue in some detail in my study on Ohio’s Dumb Taxes. I also sum up the issue in this Viewpoint:

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.

Currently the state Senate is debating the Governor’s “economic stimulus” package. In reality, this bipartisan spend and borrow mess will do nothing to help the state’s economy, as discussed in Sam Staley’s Viewpoint. Unfortunately, some cities in Ohio are passing resolutions urging the General Assembly to engage in pork barrel spending, reward politically-connected industries, and burden future Ohio taxpayers with debt (of course, they put it somewhat differently). The Gahanna city council, however, is bucking the trend. They voted down a resolution that was promoting the stimulus package and are now considering the resolution below, which advocates steps that would do much more for the state’s economy than anything being discussed in the General Assembly today:

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The AP reports that the central government of the People’s Republic of China is requiring its agencies cut spending by 5% in response to the recent earthquake. Compare that to the $1.5 billion spending increase Ohio’s politicians are currently pursuing in the name of “stimulating” our state’s economy.

A country raised on Mao’s Little Red Book shames Ohio’s political class through its vigorous embrace of limited government.

While you’ll not often find me praising Governor Ted Strickland, it seems he has done something that is worth at least lukewarm praise. In light of calls to raise tobacco taxes, the Governor has indicated that he won’t be supporting any measures to increase taxes on cigarettes and other tobacco products. As I wrote about here, there is no reason to increase tobacco taxes even further. Tobacco users already pay a disproportionate amount in taxes and it is simply bad policy to further target these users to pay for government services.

Of course, I can’t be too generous to the Governor because the current tobacco tax issue is tied in with his plan to raid the tobacco settlement fund to pay for his economic development boondoggle. There are so many issues involved here that should anger any fan of small government (the notion of a state foundation to battle tobacco use is ridiculous as is the idea that it is proper for the government to try and stimulate the economy through borrowing money) that no one involved in this issue has clean hands. But the Governor does deserve credit for resisting calls to increase tobacco taxes.

The latest “stimulus” plan from the Strickland Administration proposed taking ‘excess revenues’ (oh, what wonderful doublespeak!) from the Turnpike and spending on things like historical building renovation and corporate welfare enticements to Ohio businesses to hire more interns.

We’ve written about leasing the Turnpike (here and here) the $6 billion of dollars it could put into the Ohio economy stimulating growth though both direct expecture flows but also through the windfall of true infrastructure investments.

Instead of paying interest on bonds, the state would be collecting interest from a private Turnpike operator.

Now that’s a better idea!