The Cost Of Taxing Ciggies
DAMN … AND WE WERE JUST ABOUT TO LIGHT UP
FITSNews – May 14, 2008 – We’ve got to be honest … writing about the true fiscal impact of South Carolina’s proposed cigarette tax increase excites us about as much as watching paint dry … on a white wall.
But alas, Sic Willie is evidently quite enamored with a pair of legs belonging to a certain staffer over at the SC Policy Council, which means we are under strict orders to write about anything they spit out over there. To wit:
The Senate bill that expands Medicaid eligibility through a 50-cent cigarette tax increase would cause a $40 million budget shortfall by 2014 and eliminate 4,100 private-sector jobs, according to an economic analysis completed by the South Carolina Policy Council.
Oh, did we mention it’s a female staffer? Yeah, better make that clear. After expressing his willingness to kiss Gavin Rossdale on the lips the other day, we don’t want anybody to get the wrong idea about our favorite bad boy.
As for the cigarette tax increase, though, we’re not at all surprised to learn that a politically-expedient short-term excuse for growing government on the backs of a minority of the population is turning out to be of questionable economic merit. Sure, smokers use health care services more than most people, but they also pay 15-20% higher premiums for health insurance, so stick that in your pipe and … you know what, never mind. The bottom line is this thing is going to end up just like the so-called lottery for education, a lotta holler-holler but not so much dollar-dollar.
Oh, did we also mention that this particular pair of legs looks especially, especially good in a short, toile skirt? Because if not the answer to that question is “check, baby …”
Comments
By Greg Gregory on May 14th, 2008 at 3:02 pm
How the revenue from the cig tax is spent is a dabatable matter by reasonable people. Defending our 7 cents per pack tax – less than 5% of the national average – is a stretch. The cost of smoking related illnesses to the state exceed the revenue brought in by 3X to 4X. A true fiscal conservative position would be for the tax to bring in what it costs the state. Otherwise, non-smokers pay 75% of the cost for smokers – seems like welfare to me.
By piepton on May 14th, 2008 at 3:39 pm
I can’t even imagine who they think is going to lose jobs over this. It’s not like a 50 cent tax increase is going to stop a whole bunch of people from smoking. Cigarettes are what we like to call in the business inelastic with no good substitute. Woohoo, econ 101. Last time I checekd the point at which they become elastic was around $5 a pack (last time I checked was when Canada started putting in laws like this to curb usage a decade ago).
I don’t see this making much of a change at all. The tax money will go into Medicare through one door and they will take most of some other tax out of Medicare through the other and spend it on Senate pig roasts or something. Man, I sound cynical. I’d better go read an Obama speech to pep myself up.
By Rob W. on May 14th, 2008 at 3:40 pm
For a perspective on the effect that cigarette taxes have on the national budget, check out the Reason article below. Basically, it says cigarette taxes are regressive (since lower income earners smoke more cigarettes) and that, since smokers die earlier, they actually cost the government less money than nonsmokers.
http://www.reason.com/news/show/121558.html
By Mr. Blackwell on May 14th, 2008 at 4:10 pm
Peipton- You must have missed the Econ 101 class when they addressed Pigovian taxes (sin taxes). I hope economics was a core class for you and not your major.
http://www.common-sense.org/?noc=/common_sense_says/02_may
By sunshine39 on May 14th, 2008 at 4:26 pm
NEWS FLASH — SC adults who are covered by SC Medicaid insurance *and* who legally purchase and smoke cigarettes in South Carolina do *not* pay any kind of “higher premium” for their health insurance coverage! So, why not have those same adults pay a $1 health insurance premium (in the form of a $1 per-cigarette-pack “tax”) direct to our state’s Department of Revenue every time they buy a pack of cigarettes? For a pack-a-day smoker, that’s about $30 per month, $360 annually — sounds like a reasonable health-risk-condition-related supplemental assessment to me! And, appropriately, a proportionate share of *all* new revenues from said $1-per-pack cigarette “tax” should go directly into the SC Medicaid budget to help cover the over $350 MILLION in direct-smoking-related illness costs incurred EACH year by SC Medicaid-insurance-covered adult smokers who are of legal age to purchase cigarettes in our state. The rest should be set up for private health insurers to heavily discount smoking-cessation support services for when the non-SC-Medicaid-covered smokers (eventually) come to the point in their lives when they decide they are ready to quit smoking altogether (and stop having to pay the “15-20% higher premiums for health insurance†to their private health insurer). And, if a lot of current adult smokers end up “waiting†to quit until they are Medicare-insurance-covered (e.g., over 65 years of age), then that’s why the federal government should also start charging $1 per-pack in federal cigarette tax (rather than the current 39-cents-per-pack), and direct those additional revenues right into the federal Medicare budget. Health economists [at both the US Centers for Disease Control & Prevention, and the US General Accounting Office (http://www.gao.gov/new.items/d03942r.pdf )] tell us that for every pack of cigarettes sold in South Carolina, there is a $7.20 health-care bill that must come from public tax dollars to fund the long-persistent shortfall in revenue from state and federal cigarette taxes. Enough said.
By how the mighty have fallen on May 14th, 2008 at 4:44 pm
using words like “toile” isn’t exactly bailing you out of the gavin rossdale comment, buddy.
By Vagabond on May 14th, 2008 at 4:55 pm
The average pack-a-day smoker would spend an extra $180 per year on cigarette taxes under the Senate plan. That’s money that otherwise would be spent on groceries, gas, DVDs, etc… and go into the pockets of South Carolina businesses. When businesses earn less money they hire less staff — that’s how you get the job losses.
By Silence Dogood on May 14th, 2008 at 6:04 pm
Rob W. you noted “Basically, it says cigarette taxes are regressive (since lower income earners smoke more cigarettes),” I have seen other places where people call this a regressive tax because more poor people – apparently – choose to smoke then rich people. However since this is a ’sin’ tax as properly pointed out earlier by those who choose to smoke it is not correctly a labled a regressive tax. It may have a regressive affect. But for instance on things that everybody does – or practically everybody, like a strict sales tax on groceries or on everything that is a regressive tax. As smoking is a choice then it is not correct to call this a regressive tax.
Also, by the logic that “since smokers die earlier, they actually cost the government less money than nonsmokers” would you agree that everyone in poor health is actually much cheaper to the governmet than everyone in good health BECAUSE those in poor health die sooner than those with good health?
P.S. I really hope your answer is not yes.
By Believe It Not (a.k.a. Sic Willie's Stalker) on May 14th, 2008 at 8:02 pm
What the h@ll is this about.
Cigarettes have killed eleventy brazillion people and cost taxpayers mega-brazillions of dollars every year in health insurance costs.
Let’s start the non-partisan effort here and now: Ban The Butts!!!
By Calhoun Fawls on May 14th, 2008 at 11:51 pm
Perhaps there should be a higher tax on coffee and other like products. The liberals wanting to tax ciggarettes and ban them all together drink those mega lattes loaded with sugar and vessel constricting cafeine.
Then, let’s go after health foods. Yes, health foods. Because if people eat those and excericise they end up getting more out of SSI than they paid in.
Fair is fair.
By sunshine39 on May 15th, 2008 at 2:26 am
Job loss? That pales to the loss of worker productivity and lost income due to direct smoking-related illness! Heck with the claim that there’ll be $180 per year paid in increased SC cigarette tax that won’t “otherwise be spent” by SC smokers in local stores buying other goods (per Vagabond) — Assume that said smoker earns $10 per hour on his/her full-time job. Then, figure that $180 equals 18 hours of earnings: tell me that a smoker is *not* going to have at least two sick days unpaid out of work each year due to direct smoking-related illness — there’s your $180 (at least) right there in *lost earnings* that will simply never be available at all to “otherwise be spent”!
By Wiliam on May 15th, 2008 at 5:28 am
There are two problems with this bill.
The “money†is not about the end user…the persons needing the insurance. This new tax has been pushed by doctors, hospitals, insurance companies, consultants, etc…this is a huge windfall to them. Sure, there will be SOME benefit to SOME people needing insurance, but this tax amounts to a huge handout to special interest.
Secondly, is that Health and Human Services is the most wasteful and inefficient unit of state government. The average person in this state cannot imagine how poor the management and oversight is…nor the distressing effect it has on the poor and sick people of this state.
By Rob W. on May 15th, 2008 at 12:24 pm
Will- I can’t find the information you quote anywhere on the SC Policy website; the only tobacco-related items I can find are a brief summary in the “week in review”. Did they actually do an analysis, and if so, where did they put it?
Silence- I can accept that this is not strictly a “regressive tax”, but that it does have a regressive effect. More poor people end up paying the tax than rich people.
I would also accept that not all people in poor health save the government money; we don’t have any data on it, but yours seems like a reasonable assumption. We do, however, have some data on how much one group of people in poor health (smokers) cost the government, even if those studies are a bit old. A number of the studies are cited in the link I put in earlier, but one 1997 paper in the New England Journal of Medicine (linked below) concluded: “If people stopped smoking, there would be a savings in health care costs, but only in the short term. Eventually, smoking cessation would lead to increased health care costs.”
After reading that conclusion, I tried to delve a little further into the issue. There is a link from that article to a (partially pay-walled) letter challenging it’s conclusions, but since I’m not a health economics researcher (just a chemistry one) and I couldn’t access many of the papers that cited the original, I can’t tell who is correct. Since the New England Journal of Medicine is one of the top journals in the field, I would guess that they put the paper through pretty vigorous review before publishing; if anyone on here has a better handle on this stuff than I do, please fill us in on the current consensus.
In conclusion, it would seem that the data (not our assumptions) argues against the possibility of lowering health care costs by hiking cigarette taxes.
NEJM Article: http://content.nejm.org/cgi/content/abstract/337/15/1052
By Silence Dogood on May 16th, 2008 at 1:11 am
Rob W, thanks for a well reasoned response and the link – I will check it out.
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