Are you ready for a tax hike?

Word is that the Tax Reform Council created this past session by the General Assembly is considering a cigarette tax increase as part of the suggestions for “tax reform” that it will present in the next session.

One of the many reasons for increasing cigarette taxes from the nanny-statists is that it will deter smoking. These are generally the same people that will tell you in another breath that it’ll bring more tax revenue to the state as well. However, we can see from other parts of the country, such as District of Columbia, Florida, Maryland, New York and New Jersey, that when cigarette taxes are increased that sales decrease.

And when cigarette tax revenues fall, they’re going to look elsewhere to make up for the lost money. Either by spending cuts or raising taxes.

A point that should also be made is that higher cigarette taxes hit the poor the hardest. During the debate over expansion of SCHIP, the Associated Press concluded that cigarette taxes are “one tax that disproportionately affects the poor, who are more likely to smoke than the rich.” This also marked the first time that President Barack Obama broke his pledge not to raise taxes on individuals making under $200,000.

Roy Barnes considers the cigarette tax to be a “user fee,” according to an answer he gave the Georgia Association of Convenience Stores:

I have never proposed or voted for a tax increase in my career, and before we impose a tobacco tax user fee, I want to take a look at current tax breaks that has been given to special interests. As of 2006, there were sales tax exemptions worth over ten billion dollars alone. As Governor, I’ll take a hard look at these exemptions and if a tax break doesn’t benefit every Georgian – like the exemptions on groceries and drugs – then it’s on the table to be suspended till we can afford to educate our children and protect our citizens. We cannot continue to expect taxpayers to bare the burden for these special interest groups.

In November of last year, Nathan Deal told the Savannah Morning News that he would sign a bill increasing the cigarette tax:

U.S. Rep. Nathan Deal says he’d sign a bill raising the state cigarette tax $1 a pack if he’s elected governor next year.

Campaigning this week in Savannah, Deal said the bill deserves consideration, but added he probably wouldn’t push for its passage.
[…]
“Most tax increases are not going to be favorably received in a downturn economy,” he said.

But he said an increase in the cigarette levy “is one of the areas where there is more public acceptance.”

There are many arguments for increasing cigarette taxes, from keeping kids from smoking to raising tax revenues, but they don’t pan out. The issues at hand is really the inability of legislators to practice what they preach. They talk a great game on the campaign trail, but when it comes down to it they are going to do what all politicians do…buy votes by targeting a social bogeyman.

Vote carefully, Georgia.

38 comments

    • bowersville says:

      And quickly becoming the financial center of the southeast in Charlotte. I read an article 2-3 weeks ago that Charlotte was looking at Atlanta in it’s rear view mirror.

      What’s next, Delta? If that happens, which I don’t think it will, maybe the idiots will stop saying Delta’s ready when you are.

      Have the idiots ever considered Charlotte is ready when you are?
      (I know you were talking about cig tax)

      • Spacey G says:

        Funny (but not really as we are here not there) how often “In North Carolina they’re doing such ‘n such…” comes up ALL too often now in conversation – about business in Georgia.

  1. John Konop says:

    Jason,

    If I follow your logic that an increase in cigarette taxes creates less usage especially among uninsured poor people than would we not save money even if tax revenue went down via tax payers picking up less expenses for health related smoking issues?

    • John Konop says:

      I do not buy the lack of cigarette sales will not hurt the economy. It is low dollar disposable spending product, which people who quite, will buy another product at that price point. Hopefully the product will be healthier than cigarettes.

      What I find most amazing is so-called conservative are for people having the freedom to not buy health insurance, smoke without insurance……and yet when the bill comes due you want tax payers to pay for the behavior.

      I am all for personal choice if you can pay the bill. If not you are just another free-loader!

      • seenbetrdayz, Ph.D. says:

        My father works for Swisher Intn’l in Jacksonville, FL. The last tobacco purge-social-experiment-tax-revenue-scheme left the warehouses filling up with unsold product for weeks before the market readjusted. People cut back tremendously on the cigarette smoking (hooray nanny state!), and Swisher cut back tremendously on work hours (boo nanny state!). Luckily, no one was laid off, that my father was aware of, but if this is going to be an annual thing, he’ll be out of work in no time.

        At least wait to carry out your social experiments during a time when the market can actually provide jobs for people who are working in industries providing a supply of goods that are in demand.

        • seenbetrdayz, Ph.D. says:

          And I agree with you that people who smoke should pay higher premiums on their insurance than those who don’t. I have no problem with risk-determined insurance premiums. It isn’t fair for those who live healthy lifestyles to have to cover the cost of smokers.

          But that is for the insurance companies to decide, not the government.

            • Lady Thinker says:

              John,

              People are required to pay into Medicare and Washington raided the funds, so while taxpayers are paying back the monies borrowed with the interest, Medicare isn’t totally funded by the taxpayers so what are you talking about? I’m confused.

              • John Konop says:

                LT,

                The way Medicare works people pay in 1 dollar on average for every 3 dollar of service they get. And the numbers are getting worse because health cost is rising way faster than the economy for years. This is why Medicare is the largest single budget issue we face in the next 10 to 20 years, as the population ages.

                • Lady Thinker says:

                  John,

                  Thanks for your answer. I know you have mentioned the 1=3 ratio before but I didn’t get it until now.

                  One problem my mom is facing is doctors refusing to see her anymore because they have stopped accepting Medicare. Now when she has a severe problem, I have to take her to the hospital where the costs overall are higher than a doctor’s costs, however, the hospital sees her and we get a referral to a doctor who will refuse to see her because he/she no longer accepts Medicare.

                  My mom and her mom’s generation gave the Medicare seed money and it is hard to stand by and see her suffer.

                  • John Konop says:

                    Reality is we are not going to get rid of MEDICARE. And you can blame both sides for your mother having that problem. We need real reform which means increases in co–pays, not covering elective services, directives…….. And all we get is a debate about death panels and stealing from grandmother. The truth is by both sides want this issue to drive the base of their party over solving the problem while your mother as well many other Americans are the victims.

                    In reality between the VA, Medicare, Government workers…… tax payers do pay for a good share of healthcare cost. Ironically so called-conservatives like Jason have no issue with the people smoking while shifting the cost on to tax payers. As I said I am all for people having free choices if they pay the bill.

                    • Lady Thinker says:

                      Your post makes sense and I have to agree. I am saving every possible penny for when my turn comes in the Medicare barrel.

                    • John Konop says:

                      Jason,

                      Who should pay for it?

                      I am all for personal responsibility. A person should have the right to smoke, drink, eat junk food, not exercise….. But if you are on a government subsidized health plan you should pay the extra cost for your life style. And you should pay into a healthcare plan if you have a job otherwise you are just pushing the cost onto tax payers.

                      The current system promotes zero lack of responsibility. And unless we are going to eliminate all government healthcare plans for workers, Medicare, county hospitals…….which neither party is calling for, we must make people pay for their behavior.

            • hannah says:

              Would you want them to be paid by the tooth fairy? Everyone that uses our currency contributes a portion into the common pot for services desired and not. That some services are not paid nor wanted by the recipients (fire suppression) and some are simply not wanted by the recipients (incarceration) is why we have a common pot. When the recipients expect to like what they get, they go to market.

  2. Lifetime367 says:

    You wrote, “… when cigarette taxes are increased… sales decrease.”

    While that is usually true, it’s also a misleading statement.

    The purpose behind the increase is to minimize a very unhealthy, very costly behavior. Tobacco tax increases accomplish that goal by driving down sales of cigarettes.

    What you didn’t address is TOBACCO TAX REVENUES. In every case, when tobacco taxes are increased, tobacco tax revenue INCREASES. So cigarette tax revenues DO NOT “fall” as you incorrectly wrote in your post. The opposite is always true. Tobacco taxes are a proven method for raising revenue in spite of what tobacco lobbyists may try to tell you.

    I don’t often agree with former governor Barnes, but he is absolutely 100% dead-on right when he calls a tobacco tax a user fee, but it can be taken a step farther. It’s also a PURELY VOLUNTARY USER FEE. A gas tax is a user fee, but gasoline is a necessity in our lives. I don’t know about you, but I cannot simply choose to stop buying gasoline. Cigarettes are an optional expense, not a necessity. A tobacco tax is a user fee in it’s purest sense. To that end, if you don’t want to pay it, don’t buy cigarettes.

    Deal is also right about the tobacco tax when he says a tobacco tax “is one of the areas where there is more public acceptance.” He knows that because it’s been polled over and over in recent years and the results keep coming back the same. First of all, 80% of the Georgia population does not smoke. Secondly, polling data consistently shows that Republicans and Democrats, much like their respective nominess, agree. Approximately 75% of the Georgia population approves of an increase of a dollar a pack.

    And why shouldn’t they? Cigarettes are an expensive and deadly drug delivery system that costs smokers their lives and non smokers millions of dollars in Medicaid revenue to pay for smoking caused illnesses that smokers bring on themselves and then can’t afford to pay for. As a state we need to do everything we can to discourage young people from buying their first pack of cigarettes and beginning an odyssey of addiction that will cost them dearly.

    • Jason says:

      The purpose behind the increase is to minimize a very unhealthy, very costly behavior. Tobacco tax increases accomplish that goal by driving down sales of cigarettes.

      I understand that argument, however, this also a misleading statement. As I noted, this tax increase is often used as tool to bring in more revenue, but when revenues drop, as we’ve seen in other states, the program(s) that they were supposed to fund suddenly don’t have the money expected to fund them. Tax increases in other areas are no on the table, in most cases.

      • Lifetime367 says:

        Tobacco tax increases do drive down slaes of cogarettes. I don’t see how that statement is in any way misleading.

        As for revenues, tobacco tax revenues spike upward when a tobacco tax increase is implemented. They then begin to decrease over time, but only very slightly and very predictably, as tobacco tax revenues in Georgia have done since the last iuncrease in 2003. The economists use the word “inelastic” to describe tobacco tax revenues because they know that enough people will keep buying them at the higher price to make up for those that actually do quit. Tobacco tax revenues are also more dependable than a lot of other revenue streams like gas taxes and hotel/motel taxes that can be significantly affected by the ebbs and flows of the economy.

        • Jason says:

          This was addressed in the post. Empirical evidence shows that taxes drives down demand.

          Tobacco tax increases do drive down slaes of cogarettes. I don’t see how that statement is in any way misleading.

          I’ve explained this statement and why it is misleading, twice.

          • Lifetime367 says:

            No, you haven’t explained it twice. You’ve just said it twice. Just because you say it’s misleading… that does not make it misleading, no matter how many times you say it.

            Look at it this way:

            If 100 people buy a pack of cigarettes now and pay the current tax of 37 cents per pack, then the state sees 100 x .37 in revenue or $37.

            If the state raises the tax by $1/pack and those same 100 people buy a pack of cigarettes, then the state gets $137 in revenue.

            If the higher price drives down sales of cigarettes by 10%, (which is higher than the estimated amount) then you still have 90 people buying 100 packs of cigarettes and paying $1.37 per pack in taxes, which is still $123.30 in revenue and that’s still $86.30 in new revenue. That’s a lot more revenue than was collected at the current tax rate.

            Again, the focus should be on new revenue generated – a big plus when we have a 2 billion dollar budget shortfall – AND on the decrease in cigarettes sold – another big plus

            • gatormathis says:

              The farmer recieves approx 2500 to 3000 dollars gross for an acre of tobacco that takes a high percentage of that money to produce.

              An acre of tobaco produces approx 100,000 packs of cigarettes. So at 3 dollars a pack, in New York City, that is approx 300,000 dollars realized from an acre of tobacco, a pittance compared to just what the tax collector who never touches or assist with the gets to gather up. In Georgia, that amonut is 37,000…..100,000, or 137,000….whichever number the final tax is based on. There used to be a Senator Lowery in New York who was always worried about the amount of money taken in by farmers, funny, I wonder how she feels about the government making so much money. So, looking at these numbers, it is easy to see, production of tobacco is more essential to the funding of the government than it is to the growers probably……….

              The math is easy, ever what the tax is, multiply it by 100,000, the amont of the average number of packs coming off an acre.

              Pretty lucrative business the government runs there.

              • Progressive Dem says:

                The hole in your argument is you are talking about a tax increase in a city, not a state. Smokers who commute into DC, stopped buying the District. DC is not going to prove your point.

                • Jason says:

                  Georgia is surrounded by states with a lower cigarette tax and Atlanta is not all that far from the Alabama state line. That’s not a hole in my argument, it proves my point.

    • joneslawn says:

      I’m sorry, but basically your post can be summed up in two separate statements-both of which run counter to my understanding of our government:
      1-Taxes should be used to alter people’s actions.
      2-Majority rules.

      As for your statement that this tax would be a “voluntary user fee”, no tax can be called voluntary, if I have no choice in whether I will pay it to use a product.

      The only “voluntary” form of revenue collection I have ever seen the government participate in is that little box on your tax return, opting to give @1.00 to the campaign slush fund.

    • Dave Bearse says:

      “In every case, when tobacco taxes are increased, tobacco tax revenue INCREASES. So cigarette tax revenues DO NOT “fall” as you incorrectly wrote in your post. The opposite is always true. ”

      The market is probably on the side of the curve where increased taxes would increase revenue, but there is an optimum tax rate beyond which tax increases would result in decreased revenue. Thus the statements above are as incorrect as the patently false statements that tax decreases always increase revenue because the economy grows more than enough to compensate for the lower rate.

  3. B Balz says:

    The Tax Reform Council will address many ‘revenue enhancement’ angles and it will be interesting to see their final recommendations. One thing I can be sure of: Most of us won’t like much of it.

    Why don’t we have a ‘blue-ribbon, non-partisan” State Government Cost Reduction Council?

    I wonder what the cost of unfunded Federal mandates are to Georgians?

  4. View from Brookhaven says:

    Question…

    I haven’t paid much attention to the tobacco tax proposals that have come up recently. Have they been written to cover all tobacco products (cigarettes, cigars, loose tobacco, etc.) or no?

    I don’t smoke cigarettes, but I do enjoy an evening cigar during the warmer months. And while I order most of my stock through online warehouses, I’ll visit a few local shops as well.

  5. Rick Day says:

    How about a tax on “medically prescribed cannabis”?

    That is a cash cow worth milking.

    It’s time to join the 20th Century, folks. Where do the candidates stand on joining the 20th Century? (yes, some of us will settle even for 20th Century common sense, at this point)

    Folks got a bill written and they are now hunting sponsors. Time to start The Process™.

  6. hannah says:

    Having been a smoker, I can attest that cigarettes make it easier not to notice hunger pangs. That said, if taxing a carcinogen makes its purchase less likely, that’s not offensive, if we’re not also secretly hoping that other forms of deprivation will lead people to smoke more.
    What people inhale, ingest, inject or excrete from their own bodies is none of the state’s business. However, the effects of the toxins being created by whatever manufacturers add to “enhance” their product should be accounted for in the price. If people want to grow, cure and roll their own, that’s also their own business.

  7. analogkid says:

    “There’s no point to any of this. It’s all just a… a random lottery of meaningless tragedy and a series of near escapes. So I take pleasure in the details. You know… a Quarter-Pounder with cheese, those are good, the sky about ten minutes before it starts to rain, the moment where your laughter become a cackle… and I, I sit back and I smoke my Camel Straights and I ride my own melt. “

Comments are closed.