The year has not come to an end, yet lawmakers are already planning on how to take more of your money during 2010. Legislators in both Utah and Kansas are both looking for ways to fix their overspending problems and mistakenly think the way to do so is through a heavier tax burden. The target is a familiar one: tobacco taxes.
Last year in Kansas a $0.75 per pack increase failed to pass, but the idea still resonates with some legislators as well as Democrat Governor Mark Parkinson. The state already has some of the highest cigarette taxes in the region, currently $0.67 per pack. One study by the Mackinac Center for Public Policy estimates 19% of all cigarettes consumed in Kansas are bought from cheaper neighboring states, such as next door Missouri whose rates are $0.17 a pack. Any tax increases will lower the quantity bought in Kansas even further.
The same situation exists in Utah, where a massive $2.30 per pack increase was defeated year. House Speaker Dave Clark was recently quoted stating that of tax increases “all of that is still on the table…for me personally, tobacco is first on the list.” Thankfully, Utah Governor Gary Herbert’s preliminary budget recommendations wisely leave out any tax increases whatsoever.
What tobacco hike backers fail to consider is that a higher tobacco tax falls predominately on lower income individuals. The average smoker has an income just over $36,000, roughly 30 percent less than non-smokers. Any tax hikes in either state would only compound the harm done by the 156% increase at the federal level that was imposed earlier this year. Furthermore, excise tax increases never generate expected revenue, as people simply buy less of the product once it becomes more expensive. Tax hikes are not the solution to these states’ overspending problems; more responsible fiscal policy is.