Tobacco taxes not a reliable source of revenue

Thursday, March 24, 2016

One of the the frustrations healthcare providers endure is knowing that many of the problems they treat are self-inflicted.

Lack of exercise, poor diet and other lifestyle choices ultimately send many of us to the hospital or the morgue.

It's tempting, therefore, to tax those poor lifestyle choices, both to make alternatives more attractive and, in this day of "universal" healthcare, to pay for the treatment required.

But such revenues can't be depended upon.

Taxing sugary sodas will push more of us to other alternatives, and creating a tax on fast-food would penalize people who can least afford it.

The conservative Platte Institute is congratulating the Legislature's Revenue Committee for deciding not to add $1.50 a pack to the state's cigarette tax, bringing it to $3.62 a pack, including federal and local taxes.

Sponsor state Sen. Mike Gloor of Grand Island points out that smoking is responsible for about $795 million in health care costs in Nebraska annually, according to the American Cancer Society. About $162.3 million of that is covered by Nebraska Medicaid.

Smokers naturally oppose increased taxation, but cigarette smugglers probably favor it.

That's because they could increase profits by bringing in smokes from Missouri, which already taxes cigarettes 17 cents less than Nebraska, or Wyoming, which is already slightly lower.

The Platte Institute cites a study from the Mackinac Center for Public Policy in Michigan, which concluded that the new rate would increase Nebraska's smuggling rate from less than 3 percent today to more than 30 percent, cutting tax revenues for the state and boosting profits for criminals.

They also cited the National Bureau for Economic Research, which found no evidence that higher state tax rates help cut the number of smokers, which are already declining for other reasons.

Higher taxes also penalize many low-income residents, and prod dedicated smokers to avoid the tax in other ways, such as buying online, crossing state lines to purchase their own cartons of cigarettes, or rolling their own.

Tobacco settlement funds helped establish health departments all across the state for the first time, and those who wish to expand Medicaid to take advantage of federal funding available through the Affordable Care Act are casting about for funding from any available source, including tobacco taxes.

But depending on tobacco addiction to provide long-range funding for important government functions is a fool's errand.

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