I’ll admit it – this one really irritates me. I don’t smoke, I don’t plan on smoking, and I consider cigarettes a rather disgusting habit that I have no interest in. So the fact that I have have so forcefully pushed back against Steve Rowe‘s proposed cigarette tax increase may seem curious to you – but it isn’t.
Quite frankly, my being whipped into such a frenzy over this issue is borne of two things: a hatred of sin taxes as a concept, and a loathing of the government legislating against “easy targets” and “low hanging fruit” just because they can get away with it (when you and I know that if they tried to do it on something more popular – alcohol perhaps? – it would border on political suicide).
Increasing the cigarette tax is exactly that – pushing a tax on an easy target, namely smokers. Only about 20% of people smoke, and even those that do smoke often don’t like the fact that they do. The rest of us tend to hate cigarette smoke, and since any proposed taxes on the product won’t really effect us, we don’t tend to care all that much.
But worse, it is uncreative thinking about policy – something I don’t find redeeming in a potential governor. In fact, I personally believe such a gimmicky proposal represents political cowardice. The state of Maine is dealing with a dirty little secret – unhinged state government, out of control programs and misaligned state priorities – and the proposal of such nonsense as some kind of “fix” to Maine’s problems (however small of a fix) avoids the big, hard decisions that the state’s next governor will need to make. Contrary to a candidate like Eliot Cutler who – to his credit – has been campaigning on telling the truth about the state’s need to swallow some bitter pills since the beginning (it was the first thing he said to me when I met him the first time), Rowe’s cigarette tax seems like amateur hour.
I am well aware many of you may not agree. After all – cigarettes are bad, people should quit, and if we can raise more government revenue while encouraging people to kick the habit, why, we should do it! Sadly, this fantasy isn’t reality. Nearly all the talking points puppeted by proponents of such taxes are either misleading, or outright untrue. Let’s examine a few to show just how stupid of an idea this is, and why anyone trying to sell you this moonshine should be summarily rejected by the voters.
Let’s take a recent example to show just how backwards this policy is. Washington DC, my adoptive home, in 2009.
In 2009, Washington, DCs cigarette excise tax was raised 50 cents in the hopes of increasing revenue. The very same “raising revenue” argument was made here in the District, but what they found once it was implemented was very different. Estimates are now showing that city revenues are coming in at $17.7 million less than expected.
DC’s city council members failed to consider the effect that would be had by raising the District’s cigarette tax rate 25% higher than neighboring Maryland and a whopping 733% higher than across the river in Virginia. Not only do new estimates from the city’s Chief Financial Officer show the tax hike will bring in less than was originally projected, but cigarette tax revenue is expected to actually be $7.6 million less than pre-tax hike levels. The CFO wrote in a letter to the mayor, that, in fact, “future increases in the tax rate will likely generate less revenue.”
The Heartland Institute reports that many other states have seen lower-than-projected revenue returns after cigarette tax hikes were put in place. This is a result of the general decline in tobacco use nationwide, cross-border shopping, Internet sales, smuggling, and other factors that are causing cigarette tax revenue streams to flatten.
No amount of taxes will force somebody to quit something they are addicted to, or want to do. They will either pay the higher price, go across state lines to get it cheaper next door (New Hampshire’s excise tax is currently$1.78 to Maine’s $2.00, and with a 50 cent or 75 cent raise in Maine’s tax, the difference will be 75 cents to a dollar per pack), or they’ll buy them on the black market. So, if your goal is to MAKE people quit something you despise of so much via punative taxes, it will fail, and in fact will drive such behavior (and revenue) elsewhere.
But more importantly, even if it did work and people began to quit, it would cut revenues, not increase them. Thus the underlying policy goal Rowe are claiming here (increased revenue to fill the budget hole) will not happen, and in fact do the opposite. This is why D.C., and other states that have tried this gimmick, have often seen revenues decline.
But more important than the endless examples of revenue projections from cigarette tax increases being bunk is the general inconsistency of the position.
If you are pushing such a policy to increase revenue, then you are essentially banking on the fact that people will not quit (or not quit in sufficient numbers to hurt the bottom line), and will continue to purchase cigarettes at the higher price in your state. As has been widely talked about endlessly, smokers are disproportionately poor and lower-middle class, so if you are banking on soaking smokers who will not be quitting, what you will actually be doing is creating a regressive tax that disproportionally hurts the poor.
“Okay”, you say, “but this is less about getting the state more money, and more about helping people quit something that is bad for them”. How noble of you, friend crusader government.
If that is your position, however, you must be prepared to understand the side effects of doing that. If you believe an increased tax like that will indeed cut demand and lead to people quitting, somebody really important is going to take it hard in the wallet (besides the poor people you are slapping around for your noble sin tax).
The small merchants in the state of Maine – specifically convenience stores and gas stations – rely on cigarette sales for an large percentage of their revenue. Using the government as a weapon to bludgeon the tobacco sales in the state will not only cut tax revenues on the product itself, but it would hurt small merchants in a big way. With so much dependence on that product, we are talking about taking food off the table for thousands of Maine families, making it harder for them to do business, causing layoffs, closing business.
That means less tax revenue from those businesses being sent to Augusta, and less income tax from employees who will now be either unemployed or have their hours cut, and potentially consuming state services on top of it all.
Maine’s fragile economy is built on small businesses like these small convenience stores, and screwing them just to make a cheap, lazy appeal for a gimmicky tax hike that won’t actually do anything is the height of irresponsibility in government.
And finally, there is the dirty little secret. The government is already so entrenched in taxing cigarettes that it would border on hilarity if it weren’t so sad. The “we know what is best for you” crowd has been knocking down tobacco products by including punitive taxes on them for years, and the result is insane. Note this graphic from NoCigTax.com’s Maine page:
Okay, seriously Augusta – do you not already take a literally absurd amount off the top of the sale of a product? Do you think adding more punitive taxes on top of that will help anyone?
So, let’s revue:
1. Projected revenues from any tax hike are likely to either be much smaller than projected, never materialize, or actually cut revenue.
2. The tax will inconvenience many consumers in the state, and likely drive a great deal of them across state lines, to the internet, or to the black market – none of which benefits the state, or the consumer.
3. You are going to screw a lot of poor people who either can’t or won’t quit.
4. If the crusade against cigarettes works and people do quit, revenues will go down, and businesses who are already clinging by their teeth to their own livlihood will be hurt.
5. The government is already screwing smokers beyond the point of sanity, is the answer to Maine’s problems really to screw them more?
Oh, right, but “teens will quit smoking”. Right, because when most of us tried cigarettes in High School, we went through the trouble of making a fake ID (which is increasingly hard to do), walking into a store, and trying to pull the wool over the eyes of a clerk, when we could just bum a few off a friend, older sibling or steal a few from your parents. What gross naivete.
There is quite literally no up side to such a stupid policy proposal. Steve Rowe should have the political courage to propose a broad based tax-increase if he thinks that taxes need to be raised to fill Maine’s budget gap. Ah, but that would be hard, because broad based taxes like the income tax effect everyone and would (rightly) result in angry voters screaming “no!” at him.
For now, Rowe has chosen to do the easy thing, and pick on a group of people who at this point are so beaten down and picked on by the government already, and make up such a small portion of the population, that they don’t have either the will to fight back, or the belief that anyone will care.
Maine’s next governor needs to be making hard decisions, facing problems with honesty and courage, not looking for stupid gimmicks that won’t even work to fix problems in the budget. It is this kind of uncreative nonsense that has created Maine’s structural mess, and it is well past time voters begin rejecting it.
Am I mad over a small, insignificant thing? Yes, I am. But it is because this is such a small, seemingly innocuous issue that so many people just shrug their shoulders at and say, “whatever” that allows bad policy like this to go through unchallenged, and encourages future lawmakers and executives to take the cheap easy way out. It is easy to be outraged at the big contentious issues, but these small ones deserve more attention and in this case, push back.
This non-smoker is sick of smokers being used as the whipping posts of bad policy. Enough is enough.
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