Smoke 'em if you can afford 'em

Ready or not, that new cigarette tax is coming soon.

Texas smokers will pay significantly more for cigarettes starting Jan. 1 when the excise tax increases by $1 a pack in a move that health experts hope will discourage folks, especially teens, from lighting up.

The state tax increase - from 41 cents to $1.41 per pack - also will help pay for school property tax cuts.

[...]

"The cigarette tax, more than anything, will have the most significant impact in stopping kids from ever starting smoking, because they are so price-sensitive," said James Gray, a spokesman for the American Cancer Society, Texas chapter.

The Texas tax increase will push the price of a single pack of cigarettes to around $4.50.

An estimated 143,000 Texas adults will quit smoking, and a projected 284,000 teens never will start smoking as a result of the tax increase, Gray said, citing various studies. About 3.3 million Texans currently smoke, based on a 20 percent adult smoking rate in the state, he said.

[...]

[Lawmakers] could not resist raising cigarette taxes in the spring when searching for more revenue to cut property taxes. The $1-per-pack increase should generate roughly $700 million a year more in taxes, according to projections by the comptroller's office: $682.6 million in fiscal 2008 and $722.8 million for fiscal 2009.

All of that new tax revenue will go to reduce property taxes. But Senate Health and Human Services Chairwoman Jane Nelson, R-Lewisville, said she will renew efforts in the upcoming legislative session to allocate a modest portion for smoking prevention programs aimed at teenagers.

"As a mother and a grandmother, it's very important for me that we stop a whole other generation of kids from being hooked on tobacco," she said. "The cost is just too great."

She said she wants lawmakers to set aside 5 percent of the new tobacco tax revenue for anti-smoking programs.

"Every month you can keep a person past 14 from smoking, chances are they won't become a smoker," Nelson said.

Here we arrive at the crux of the issue I have with this tax. I'm okay with using a cigarette tax as a means to discourage smoking, and I'm okay with using it to fund anti-smoking efforts. The problem is that if you're doing these things, you should expect the revenue from said tax to decrease over time - at least, that should be a goal. As such, using it to fund a longterm program with sure-to-be-increasing needs like a property tax cut makes no sense. What will we do when the revenue from this tax starts to decline? As far as I can tell, the answer from this Legislature is "Let that be someone else's problem".

El Pasoans will save $5 in excise taxes on every carton by shopping in neighboring New Mexico, while Texarkana shoppers could save more than $8 per carton in Arkansas.

"The impact will be disproportionate along those areas of Texas that border other states, because the consumer will readily cross the border to save that much on cigarette taxes," [Chris Newton, president of the Texas Petroleum Marketers and Convenience Store Association] said.

He said he fears that more smokers will turn to the Internet for tax-free cigarettes, Indian tribal retailers or black market cigarettes.

The convenience store industry will urge Texas lawmakers and the comptroller's office to beef up enforcement efforts.

"Our association has encouraged its members to promptly report any signs of illicit activities or other tax-evasion schemes to the comptroller's office or their local law enforcement authorities," Newton said.

I'd love to know what assumptions the Comptroller's office made about the black market when determining the revenue for this tax. How much will we lose to non-taxed sources (legal and otherwise), and how much will we spend trying to enforce the collection of this tax? All I can say is that I hope someone follows up on this in a year's time.

Posted by Charles Kuffner on December 27, 2006 to Budget ballyhoo | TrackBack