Editorial: Cigarette Taxes A Health Boost [04/08-2]

Excerpts from: Cigarette taxes a health boost

The Cincinnati Enquirer [04/07/05]


It's become almost a chain-smoker kind of reflex for revenue-scarce states - Ohio and Kentucky included - to raise cigarette taxes for a quick fix.

Tax opponents, from giant Philip Morris to your local convenience store dealer, warn that tobacco tax increases enlarge an already booming black market that rob states of tax revenue, and deprive legitimate dealers of customers who buy more than just cigarettes.

Cigarette taxes - like gambling taxes - are not a reliable, long-term revenue source to base a state's future on, and may not even deliver all the short-term revenue desperate governors hope for. But a cigarette tax increase can still make good public policy sense. Despite nasty unintended consequences, states can make a good case for raising excise taxes to discourage smoking and spare taxpayers from smoking-related health care costs, which are a big reason states face huge budget deficits in the first place.

Ohio Gov. Bob Taft wants to raise Ohio's cigarette tax by 45 cents, to $1 per pack. Kentucky Gov. Ernie Fletcher in February persuaded lawmakers to raise their state's 3-cent tax to 30 cents a pack, but they balked at an escalator clause that would have further boosted the tax in later years as nearby states raised theirs. Kentucky may fire up the debate again next year, when offsetting tax cuts kick in and decrease revenue.

If Ohio enacts a $1 per pack tax, it could reap $200 million to $350 million the first year, and lesser revenue thereafter. Cigarette taxes especially impact dealers in border areas like Cincinnati and Toledo. Cincinnati smokers head to Northern Kentucky for cheaper buys, and Michigan smokers who pay a $2 tax at home cross into Ohio to buy. Ohio and Indiana both tax now at 55 cents a pack.

The states' gold rush to raise "sin taxes" has spurred a black market in contraband cigarettes and armed robberies. Cigarettes are almost as good as cash outside prisons as they are inside. Several smuggling busts have nailed traffickers who were using their illegal profits to supply foreign terrorists. Philip Morris USA spokeswoman Jamie Drogin says Web sites engaged in illegal online sales have grown in a few years from 100 to 1,500; the cigarettes often are counterfeit; and the penalties laughable. Such crimes should be raised from misdemeanors to felonies.

Total nationwide cigarette use has been declining 1 to 2 percent a year since the early 1980s. Ohio's taxable cigarette sales in recent years also have dipped. The tax is a declining revenue source. Lawmakers should have no illusions that it's a deficit fix. A higher tax probably would not have deterred someone like ABC's Peter Jennings, a former smoker who on Tuesday revealed his lung cancer diagnosis. But health effects should figure in lawmakers' calculations. It's no accident Kentucky leads the nation in smoking rates and lung cancer deaths. Higher taxes can help deter teens. That was part of Fletcher's calculations.

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