OPINION: Tobacco-Tax Backers Have Policy Issues

Tobacco-tax Advocates Suffer from Policy Schizophrenia - By Jim Waters

Paducah Sun executive editor Steve Wilson's recent missive in favor of raising Kentucky's cigarette tax by a Cuban cigar-sized 40 percent was in response to my recent column calling on policymakers to leave "any and all" tobacco-tax increases out of Frankfort's tax-reform conversation altogether and instead focus on pro-growth opportunities.

Wilson offers arguments filled with policy schizophrenia that endorses unfair and unproductive policies of raising taxes on the backs of poorer Kentuckians – who are disproportionately impacted by cigarette taxes – while cloaking such passion for giving government more of taxpayers' hard-earned money to spend within claims that it's all about making our smoking-crazy state healthier.

Wilson may sincerely believe that raising cigarette taxes will create a healthier citizenry but fails to offer sufficient evidence showing when, where and how tax increases have affected such change. 

In fact, smoking rates among Kentucky's teens were already dropping dramatically even before the commonwealth last raised cigarette taxes, revealing that education and cessation campaigns are much-more-effective approaches to helping address this unhealthy habit among our state's young people. 

While Wilson does offer a nod toward cessation funding, he totally ignores the effectiveness of hard-hitting education campaigns that display demonstrable success in preventing young people from lighting up in the first place. 

He further confuses the issue with his contradictory same-sentence claim that a higher cigarette tax would both "generate more revenue for the state" while also causing a "decline in smoking that would follow higher prices." 

Logic alert: If we raise taxes and fewer people buy cigarettes, how does that generate "more revenue" for the state?  

Instead, raising cigarette taxes results in deviant incentives whereby such tax hikes initially bring in some additional dollars resulting in new government programs staffed with new bureaucracies that must then find a way to financially survive when smoking rates and revenues decline.   

Apparently, though, supporters of Wilson's position believe they can get by with calling for tax increases that disproportionately affect the poorest citizens if it involves an activity for which society largely disapproves.  

Not only does such a position directly contradict the most basic principles of liberty, which require the protection of minority groups' rights to engage in legal activities, it's just poor tax policy that genuine conservatives will reject out of hand. 

"The reality is that most states support cigarette tax increases because they want more revenue," the Tax Foundation states in a 2012 publication identifying trends in taxation.

The foundation's report – released in the same year that former Gov. Steve Beshear's Blue Ribbon Commission on Tax Reform met and recommended raising the state's cigarette tax rate, which Wilson points to in support of his position – concludes such taxes are ineffective because they result in "allowing the majority to shift the costs of government programs onto the minority," which "can result in instability as citizens demand more government than they are willing to pay for."

While Wilson also demands smokers be taxed more to cover smoking-related health costs, the foundation points to a series of studies to show that's already happening, arguing that "nearly all the costs of smoking – health care, higher insurance premiums, lower productivity at work – are borne by smokers themselves."

Smoking isn't even close to the No. 1 problem in the eyes of most Kentuckians, which indicates there isn't exactly a groundswell for big-government policies like higher cigarette taxes and forced smoking bans.  

A January 2015 study in Northern Kentucky revealed that likely voters thought the heroin problem, for example, was a much-higher priority than a smoking ban by an 87 percent to 7 percent margin. 

Again, a reminder for legislators preparing to address Kentucky's tax code: that survey was taken of "likely voters." 

Jim Waters is president of the Bluegrass Institute; Kentucky's free-market think tank. Reach him at jwaters@freedomkentucky.com. Read previously published columns at www.bipps.org.