Nathan Benefield posted on 6/5/2010 9:03:00 PM
Lee,

The "what would you cut" question frustrates me, as this site if full of ideas for cost-savings. Start with my latest testimony on the issue: http://www.commonwealthfoundation.org/research/detail/cost-saving-ideas-for-pennsylvania-state-budget and also read our Ten Tips for balancing the budget: http://www.commonwealthfoundation.org/research/detail/ten-tips-to-balance-the-budget

But even so, I believe the burden of proof is on those who advocate for tax hikes. To justify taking more from Pennsylvania residents and businesses, you must first make the case that all $66 billion in state spending ($180 million per day - http://www.commonwealthfoundation.org/research/detail/how-fast-is-harrisburg-spending-your-money - more that the entire tobacco tax proposal) is an effective and appropriate use of taxpayer money.

For starters, do you support

- $750 million for "economic development" incentives/corporate welfare: http://www.commonwealthfoundation.org/policyblog/detail/pa-house-authorizes-new-debt-for-corporate-welfare

- The $75 million film tax credit: http://www.commonwealthfoundation.org/policyblog/detail/pennsylvanias-film-tax-credit-is-a-flop

- $15 million for Harley Davidson: http://www.commonwealthfoundation.org/policyblog/detail/rendell-handouts-to-harley-still-not-creating-jobs

- $1 billion in Welfare Fraud: http://www.commonwealthfoundation.org/research/detail/welfare-fraud-and-abuse

- $9 million just to make the park next to the state capitol look pretty: http://www.pennlive.com/midstate/index.ssf/2010/03/crews_remove_trees_for_capitol.html

- Prevailing Wage mandates that drive up the cost of construction and take dollars out of the classroom: http://www.commonwealthfoundation.org/policyblog/detail/the-cost-of-pennsylvanias-prevailing-wage

- $1.5 billion in subsidies for alternative energy: http://www.commonwealthfoundation.org/research/detail/green-jobs-destroy-good-jobs

- The state continuing to stay in the business of running liquor stores: http://www.commonwealthfoundation.org/research/detail/government-run-liquor-stores-the-social-impact-of-privatization

- Refusing to make money by privatizing state parks: http://www.commonwealthfoundation.org/research/detail/private-parks-promote-public-preservation

- $24 million for consultants for a project everyone knew would never be implemented: http://www.paindependent.com/research/detail/turnpike-spent-24-million-on-failed-i-80-tolling-project

- Paying a consultant to hype up Gov. Rendell's legacy: http://www.philly.com/inquirer/front_page/20100605_Pa__funding_research_on_Rendell_policies.html#axzz0pygjxBF3

Lee posted on 6/5/2010 7:00:00 PM
Nathan,

In terms of smuggling across state lines, the cigarettes are being purchased on indian reservations where there isn't tax period. However, being a collector for DOR I can tell you that many people are being forced to pay the tax back with interest and that problem is being alleviated. In terms of taking the money out of the private sector, through this taxation services and programs are being funded to benefit the citizens of Pennsylvania. You act as if it is going into someones pocket never to be reused.

I would be interested, though, in seeing what your ideas are in terms of strictly cutting our way to a balanced budget this year. Which services would you cut? How many people would you lay off to balance this budget? Is that a benefit to the economy in PA? You are proposing something that the majority in the state does not support. The polls have shown that the support is there for a mix of revenue enhancements and cuts to balance this year's budget. The public is on board with that method.

The notion that terrorism is being funded by cig taxes may be true, but it is certainly not the primary method of funding. I would be interested in seeing what percentage of funding is believed to be coming from cigarette taxes. I believe that smuggling the cigs into NY and selling is happening frequently due to NY's very high taxes on tobacco.

I do believe that taxing cigars and chew is certainly going to have a negative impact on the industry as it should. Hopefully through excise taxation it will curb some of the usage to lower health care costs. Again, the benefits outweigh the costs.

Nathan Benefield posted on 6/5/2010 3:42:00 PM
Lee,

Two comments when suggesting smokeless tobacco/cigars be treated like cigarettes. One is they are not substitutes - cigarette smokers don't switch to cigars or chew because of a tax.

Second, consider the effect of the cigarette tax - it has led directly to the things you think won't happen: people smuggling in cigarettes across state lines and from the black market. In fact, here is a recent analysis of how cigarette taxes have helped profit terrorists: http://m.standard.net/topics/opinion/2010/06/04/tobacco-taxes-finance-terrorism#

Also, it was not a farmer who was going to move (though PA is the only state in which tobacco farming is growing), but a online cigar retailer - who set up shop in Pennsylvania precisely because the state has no excise tax on cigars. Is it not clear why they might move to Florida (which also has no cigar tax)?

Whenever you tax something, you get less of it. Taxing tobacco products - taking more money out of the private sector to fund government spending - is going to have a negative impact on the tobacco industry, and the overall state economy. I know you do not believe this, but it isn't a matter of Faith, but of empirical evidence.

Lee posted on 6/5/2010 10:41:00 AM
I don't believe it is accurate to compare the tobacco industry to other non-tobacco industries in terms of excise taxation. When looking strictly at the tobacco industry, I would agree it is a subsidy in that specific industry. Tobacco has excise taxes with the exception of cigars and smokeless tobacco.

As far as the threat of moving to FL, I would call the farmers bluff on that one. Regardless of where they are located, they will continue to serve customers in PA. So the revenue will still be there for the state. No neighboring state does not implement an excise tax on cigars or smokeless tobacco. Therefore, no threat to the industry in PA. I simply do not believe PA will experience a loss of tobacco farms, or jobs, as a result of the new taxation. It comes down to the positives outweigh the negatives.

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