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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
DECEMBER 21, 2010
Cigarette Taxes Increase Crime
Our friends at the Mackinac Center have released a study on the smuggling of cigarettes due to high cigarette taxes. While politicians often tout raising taxes as a tool to discourage smoking, the study concludes that the increased crime associated with smuggling undermines gains in public health.
This point is demonstrated in an incident last week, where a New York man was arrested for cigarette smuggling. He could face up to 12 years in prison—an expense far outweighing the $9,500 he avoided in state taxes.
Smuggling occurs both in "casual smuggling"—i.e., crossing the border to a nearby state to buy cigarettes for personal use—and "commercial smuggling" by those intent on reselling cigarettes tax free. Pennsylvania has recently been the beneficiary of casual smuggling, as New Yorkers are crossing the border to buy here, after New Yorks dramatic cigarette tax hike. But the study found most New Yorkers are smuggling in cigarettes from low-cost Delaware, not Pennsylvania.
The study estimates on average 5% of the cigarettes consumed in the commonwealth from 1990-2006 were smuggled in from other states.
posted by ELIZABETH STELLE | 11:49 AM | 0 comment
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
