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JUNE 2, 2010 | Policy Points by COMMONWEALTH FOUNDATION
Pennsylvania Budget Facts 2010: Tobacco Taxes
Gov. Rendell proposed a tax of 30% on the retail price of cigars and smokeless tobacco products, in hopes of collecting $42 million in the upcoming fiscal year.
JULY 3, 2009 | Policy Points by COMMONWEALTH FOUNDATION
Budget Facts 2009: Cigarette Taxes
Pennsylvania faces a $3 billion tax revenue shortfall in the state’s General Fund Budget. Competing proposals from Gov. Ed Rendell and the Republican-led Senate differ on raising taxes and reducing/reprioritizing spending. This is the sixth in a series of fact sheets on the state budget.
JUNE 9, 2008 | Commentary by NATHAN BENEFIELD
The Nanny State Mentality
Anyone who has observed politics for long would see that too many politicians believe nothing positive would happen unless they pass a law requiring it. They think that the American people are dependent on them for their wealth, safety, and happiness.
Recent Blog Posts
JUNE 10, 2010
Ethics of Tobacco Advisory Committee Goes Up in Smoke
Several groups have requested investigation of, or filed ethics complaints against, members of the FDA's new Tobacco Products Scientific Advisory Committee (TPSAC). Identified in March 2010, the TPSAC's twelve members will decide whether even more restrictions should be leveled against tobacco companies to "protect children" and advance the Family Smoking Prevention and Tobacco Control Act.
Facing a partisan lose-lose decision about tobacco products last year, Congress passed the buck to the FDA, giving it the power to regulate tobacco. The FDA's committee is now being questioned, though its members do not have ties to tobacco companies, an alliance prohibited by the organizing document. However, Citizens for Responsibility and Ethics in Washington (CREW) and Americans for Limited Government (ALG), and even Altria, have filed ethics complaints because some of the members have ties to pharmaceutical companies that provide quitting aids to smokers.
The producer of Nicorette gum, GlaxoSmithKline is one of the companies poised to profit from more regulations placed on tobacco. The New York Times quotes Dr. Benowitz,
I really don't see any conflict. My involvement with pharmaceutical companies is aimed at reducing the risk of smoking, quitting smoking. The aim of the committee is also to reduce the adverse health consequences of tobacco use.
Despite the evidence in violation of conflict of interest laws, the FDA has denied Altria's request to investigate these and other members of the board. The TPSAC is meeting this week to discuss the ingredients in tobacco products, presumably centering on the hotly debated inclusion of menthol in cigarettes.
The Commonwealth Foundation has researched other recent attacks on the expanding tobacco industry, including proposed tobacco taxes.
posted by LEAH ACHOR | 03:23 PM | 0 comment
JUNE 10, 2010
Tobacco Tax Fact Check (Part Two)
This is the second half of a two part blog, fact checking tmyths about tobacco taxes. This blog focuses on what the some call a good tax model - taxing tobacco products based on the wholesale price:
One reason why basing the [smokeless tobacco] tax on wholesale prices is the standard in so many states is that the amount of revenue collected increases if prices go up.
To begin, taxing smokeless tobacco products because it may harm the consenting adult, who engages in it, is not sound logic for a tax. As the Tax Foundation explains, the role of government is not to prevent individuals from harming themselves (e.g. stop us from consuming soda, salt, fatty foods, etc.), but from harming one another.
An industry should only have a "special" tax on it if it is determined the product imposes significant costs on third parties. External health costs, such as second-hand smoking, is often cited as a reason (though a controversial one) for a tax on cigarettes. However, third parties are not affected with smokeless tobacco products.
But for the sake of discussion, let's accept the argument that an external cost is the message chewing tobacco sends to children. This brings us back to why tobacco should not be taxed on the wholesale price as the prices has nothing to do with the external costs the product imposes on society.
As the Tax Foundation makes clear:
The harm caused by a unit of tobacco is essentially unrelated to its price. A $5 pack of cigarettes would not impose any costs to society or harm any individuals more than a $2 pack of cigarettes would. With respect to cigarettes, most tax-levying officials have properly understood this because every state imposes the tax based on the number of cigarettes, not based upon the sale price.
When a tobacco tax is imposed as the one proposed, it is to create a new revenue source for lawmakers at a higher cost to residents. Legislators should not be unfairly and arbitrarily leveling taxes on any industries.
posted by KATRINA CURRIE | 10:55 AM | 0 comment
MAY 28, 2010
Tobacco Tax Fact Check
The misinformation that comes out of the Policy and Budget Center (PBC) amazes me. Here is the first post of a two-part fact-checking on taxing smokeless tobacco products and cigars. PBC states:
Pennsylvania is one of only two states to exempt cigars from taxation...Pennsylvania's failure to tax tobacco products other than cigarettes is...in effect a subsidy for the tobacco industry.
It would appear that PBC is not familiar with the definitions of a subsidy (or a "tax break," for that matter). All tobacco products are subject to the states 6% sales tax; no exemptions. Smokeless tobacco products and cigars do not have a special tax aimed directly at them; however, simply not imposing an excise tax no other product is subject to is not the same as offering a subsidy.
Tobacco production in Pennsylvania peaked in 1918 and has been declining for almost a century. Over that time, the number of acres devoted to tobacco farming has declined by 83%, and annual production is down by 74%. Of the 63,000 farms in Pennsylvania, 1,150 grow tobacco - fewer than 2% of farms in the state.
The idea that a tax is okay because only a few farmers will be harmed is the tyranny of the majority our founder feard. There are 1,151 tobacco farms in the state; the majority of these farms are less than 7 acres because small tobacco farmers, many of whom are Amish or Mennonite, grow tobacco as supplementary income to cover annual real estate taxes and to keep their farms in production. The effects this tax will have on them are significant and should not be overlooked.
Further, many crops used less acres in 2009 than in 1918. Acres for harvesting oat crops decreased by 93% and wheat by 86%. During that same period, the value of production for tobacco in Pennsylvania increased 137% to $31,239,000 in 2010. According to Census data, Pennsylvania is the only tobacco farming state that gained farms from 2002 to 2007.
|
Field Crops |
Acres Harvested % Change from 1918-2009 |
Production % Change from 1918-2009 |
|
Oats |
-93% |
-88% |
|
Wheat |
-86% |
-54% |
|
Tobacco |
-83% |
-75% |
|
|
Value of Production % Change from 2001-2010 |
Acres Harvested % Change from 2001-2010 |
Production % Change from 2001-2010 |
|
Tobacco |
226% |
174% |
202% |
Finally, a tax on tobacco products hurts not only farmers, but tobacco retailers, many of whom set up shop in Pennsylvania because of the lack of a tax. With unemployment at a 25-year high, the 1,600 wholesales jobs tobacco products employee are significant. If Cigars International, with 150 employees, moves to Florida (there's no cigar tax there either), it will certainly have a ripple effect.
Lawmakers should not discount the jobs Pennsylvania could lose if this tobacco tax is imposed.
Read more on the Pennsylvania State Budget and other tax proposals.
posted by KATRINA CURRIE | 00:52 PM | 0 comment
