Hiking Tobacco Tax will Result in Other Tax Hikes

Here’s a lesson for Wisconsin legislators to learn.

In November, voters said yes to a bill that put an additional one dollar tax on tobacco products. Tobacco sales dropped dramatically in the first three months of this year, and now some legislatures are saying I told you so.

The plan, add a dollar tax to tobacco products to get people to quit. That additional tax money would fund education, healthcare, and property taxes.

That money, is already built into the budget, but since that source of funding is already starting to dwindle some lawmakers say taxes will have to be raised elsewhere to make up for the loss.

Emphasis mine.  This isn’t even an “unintended consequence.”  It was planned! 

Idiots. 

1. Is this some misplaced link that was supposed to post April 1st?  What state was this?

   I love this part: The plan, add a dollar tax to tobacco products to get people to quit. That additional tax money would fund education, healthcare, and property taxes.

   If the intention of the tax was to get people to quit (and people who quit will not be paying any tax), how can there be “additional” tax money?  Talk about your literary oxymoron.

   The other question is, have that many people actually stopped smoking, or have they maybe found alternative sources (i.e., purchase in a different state)?

   Posted by (JavaScript must be enabled to view this email address) on April 14, 2007 at 0856 hrs




2. When people quit smoking, shouldn’t this have improved the insurance rates?  If it didn’t, where did *that* money go?

   Mp

   Posted by Mpeterson on April 14, 2007 at 0946 hrs




3. You assume that some Wisconsin legislators are capable of learning from history.

   Bad assumption.

   Posted by dad29 on April 14, 2007 at 1004 hrs




4. Professor Peterson,

   You assume that all of those people quit and that it had a statistically significant impact on actuarial tables.  Odds are that many of those people just started getting their cigs on the internet, on an Indian reservation, from a neighboring state, or on the black market.  I’m sure some quit, but not that many. 

   Also, you seem to be suggesting that the cut in insurance rates, if there was any, should somehow be sent to the government instead?  How does that work exactly?

   Posted by Owen on April 14, 2007 at 1009 hrs




5. ...and that it had a statistically significant impact on actuarial tables

   And that being said, I would think that it would take longer than 3 months for the perceived benefit of all this reduced smoking to show up in actuarial tables and reduced insurance rates.

   I don’t have an actuarial or medical background, but I would think that it would take at least 5, if not 10 years, for nonsmoking behavior to show up in reduced cancer rates.  And who knows, maybe these smokers would gain weight, and then obesity issues would offset some benefits accrued from reduced smoking.

   In any event, Taxes are Taxes, and Fees are Fees, no matter what you call them or what type of social benefits you try to attach to them to make them “acceptable”.

   Posted by (JavaScript must be enabled to view this email address) on April 14, 2007 at 1058 hrs




6. The state is South Dakota.  They have a lot of Indian Reservations in the state, so that’s where many of the smokers went to get their cigarettes, I’m sure.  The Indians probably raised their price 50 cents and kept all that money- so the winners are- the Indians.  Look out for Doyle.

   Posted by (JavaScript must be enabled to view this email address) on April 14, 2007 at 1137 hrs




7. Our local paper just had an excellent article about the Register of Deeds office having sent a letter to WI State Senator Glen Grothmann expressing concerns about the proposed state budget increasing the costs of Death Certificates to $20 per certificate for the first copy as well as $20 for each additional copy (currently the first one is $7, and additional ones issued at the same time are $3 each).  She makes the point that currently 20 copies cost $64, in the future 20 copies would cost $400.  She states that in some situations, this is a 666% increase.

   So, we could have a similar scenario: less Death Certificates sold because less people dying due to the increased cigarette tax + less certificates sold because they cost too much = revenue shortage that must be made whole to cover the additional spending that was based on the presumption of said additonal revenue that was to be generated by the additional fees for death certificates.

   Posted by (JavaScript must be enabled to view this email address) on April 14, 2007 at 1427 hrs




8. And if the Indians make the money, you can bet it will find its way back to Diamond Jim. He’s their bought and paid for property.

   Posted by pdigaudio on April 14, 2007 at 1803 hrs




9. Dear Owen,

   Thanks for the courtesy of using the title, but I’m off duty (!)—plus I’m visiting you in what I think of as your house, so first names are great.  [I’ve blogged and, in the ancient days, BBS’d anonymously in order to keep in touch with what people outside the universities are thinking about but, since you and I are neighbors, I thought it’d be more appropriate not to hide behind a user id or, in this case, my titles.  I suspect we’ll agree about more than you’d expect and, when we don’t, it’ll be an honest disagreement between neighbors.  Anyway, that’s my feeling about it.]

   
   Here’s what I was thinking about the cigarette taxes: 1) there are pretty good numbers that demonstrate a correlation between increasing the price of cigarettes and people quitting and, more importantly, kids not starting.  You or I might find cheaper ways to smoke—I took to rolling my own for years before I finally quit.  So I suspect you’re right about some people hitting the reservations or buying online, but the increases do seem to make it harder for kids to come up with the extra dough to get their fix.  ;^)  Since nearly everyone who smokes takes it up before they’re old enough to legally buy cigarettes, it should have some impact on the actuarial projections. 

   —but 2) when it does impact the cost of health insurance, my suspicion is that the insurance companies will simply keep that money rather than lower our rates.  That’s sort of what I meant about “where will the money go then”.  Supply and demand dictates our rates should be improved, but I can’t imagine that will happen.

   —and, most importantly, 3) ohhellno the money should *not* go to the government. I barely trust them to spend it properly now.

   Best,
   Mp

   Posted by Mpeterson on April 15, 2007 at 1047 hrs




10. Michael, you may be right about kids not starting smoking.  Unfortunately, kids then take up drinking and drugs because it is cheaper.  Now they are making candy tasting meth.  It’s a no win situation.  Cheap smokes and kids smoke more expensive- drugs and drinking, which is better?

    Posted by (JavaScript must be enabled to view this email address) on April 15, 2007 at 1059 hrs




11. Parents should be more involved in their children’s lives and notice witch friends might pose problems. You can’t tell a kid “NO” but you can explain why not.

    Posted by drug treatment on January 23, 2008 at 2228 hrs




12. I might find cheaper ways to smoke—I took to rolling my own for years before I finally quit.

    Posted by no medical life insurance on February 06, 2008 at 0348 hrs




13. They can add 100 $ to tobacco taxes cause I’ll just use no fee balance transfers to save money.

    Posted by (JavaScript must be enabled to view this email address) on May 21, 2008 at 1925 hrs