This November, Montana voters have the opportunity to reject Initiative 185, which raises taxes on tobacco products and electronic cigarettes. Most of the money would be directed into the state’s general fund, despite claims that specific healthcare, veterans, and smoking prevention programs would be guaranteed recipients of revenue. Americans for Tax Reform opposes the initiative, a senseless cash grab and tax hike that funds ballooning the size of government through Medicaid expansion with a declining revenue source. The initiative is regressive in nature and perpetuates unsound tax policy.
If implemented, Initiative 185 would raise the tax on a pack of cigarettes from $1.70 to $3.70, the third highest rate of any state in the nation. The tax on snuff tobacco would rise to $3.70 for each one-and-a-fifth ounce, while the wholesale tax on electronic cigarettes would rise to a whopping 83%. Together, proponents argue that the taxes will generate an estimated $74.3 million a year by 2023, with the regressive burden felt hardest by those who could least afford it.
Initiative 185 also provides a laundry list of promises to dedicated percentages of the revenue to “certain health-related programs, including some of the costs for Montana’s current Medicaid program; veterans’ services; smoking prevention and cessation programs; and long-term care services for seniors and people with disabilities.”
Though these policy promises are designed to sound appealing, none of these programs will be fully funded by tobacco tax revenue, which itself declines as time goes on and less people use the products. This unfunded mandate will eventually hit all taxpayers, by growing government without a stable revenue source to pay for higher spending.
While politicians in Helena get more money to spend on any of their desired priorities, most taxpayers will receive very little benefit. The initiative caps investment in smoking prevention and cessation programs at 4% of the new tax revenue, and the electronic cigarettes, which help some people quit smoking, become demonstrably more expensive. That itself could harm public health, arguably a goal of this initiative.
Furthermore, under Initiative 185 all Montanans will pay more in taxes, not just those who use tobacco products.
The initiative eliminates the sunset provision of Montana’s Medicaid expansion, which costs $60 million each year. Only a portion of new tax revenue, however, is to be spent on funding Medicaid expansion, leaving the people of Montana to make up the multi-million dollar difference each year with some combination of higher taxes and decreased medical coverage in the future.
A tax on a declining revenue source used to pay for spending on a ballooning government service is irresponsible, will leave taxpayers on the hook for future tax increases, and should concern even those who consider themselves proponents of Medicaid expansion.