States Need Quick Influx of Revenue – Think Tobacco Tax..

December 18, 2008 - At least 29 states plus the District of Columbia face an estimated $48 billion in combined shortfalls in their budgets for fiscal year 2009 (which began July 1, 2008 in most states.) At least three other states expect budget problems in fiscal year 2010.

Rhode Island is facing some tough fiscal and economic times. Its current budget deficit of $357 million is among the largest in the nation (relative to total spending). The budget picture in South Carolina is grim. The State's Comptroller General said recently that corporate income tax collections are down 57 percent, sales tax collections are down by 18 percent, and individual income tax collections are down nearly 3 percent since July 2008. Kentucky Gov. Steve Beshear recently stated that internal economic estimates project a revenue shortfall of approximately $294 million in the General Fund in the fiscal year that ends June 30, 2009

Michigan is now facing its most critical financial crisis in decades. The Governor and the legislature are faced with a $3 billion shortfall in 2008. With tax revenues in a virtual free fall, Florida is staring down a budget gap of $3 billion and growing.

Right away legislators want to tackle state budget shortfalls by limiting social programs such as Medicaid funding threatening to leave the state’s most vulnerable populations without access to health services.

How about a tax on tobacco products?? - This is a “win-win” situation for all concerned. As pointed out by Lynn Greaves, VP of the Saskatchewan Coalition for Tobacco Reduction "Tobacco taxation has been the strongest tobacco reduction measure that exists in the world today."

Studies show that every 10 percent increase in the price of cigarettes reduces youth smoking by seven percent and overall cigarette consumption by about four percent.

Bringing the Florida state’s tobacco tax up by a dollar, now 4th lowest in nation, could generate about $1 billion in new net revenue, save nearly 100,000 Floridians from smoking-related deaths, help 123,600 adults quit smoking and prevent 209,000 youth from ever starting. Florida’s Medicaid program incurs an estimated $1.25 billion in costs due to smoking per year.

For the State of Michigan there will be a potential annual savings to Medicaid of $323 million if the smoking rate among Michigan adults was reduced five percentage points (from 21.9% to 16.9%). With a five percentage point reduction in smoking overall future state smoking-caused health care costs would decline by more than $2.5 billion. (Approximately 32.4% of the smoking related health care costs are paid by Medicaid.)

You can’t do wrong with an increase in the tobacco tax. The federal government has spoken: "Tobacco products are not safe and cannot be made safe and there is no medically established public health benefit associated with tobacco" as written by Michael Leavitt, Secretary of Health and Human Services in a letter to Joe Barton, R-Texas the senior Republican on the Energy and Commerce Committee.

The Governor of South Carolina can no longer refuse to support a tobacco tax increase (now has lowest tax in the nation at seven cents per pack) because, supposedly, a financial shortfall could occur because so many people would quit smoking. In this case, eventually the economy will return to normal generating enough tax revenue to restore normal levels.

As a result with an increase in the tobacco tax you get: the generation of more tax revenue, fewer kids considering tobacco use, adults breaking their addiction to tobacco, the cost of caring for people with tobacco related diseases would go down and since cigarette users are poorer as a group these individuals would have more money to care for their love ones. The greatest impact the higher tax will have is preventing our youngsters, our future leaders, from becoming addicted to nicotine. It’s a “win-win” situation for all.


References:
State Budget Troubles Worsen by Elizebeth McNichol and Iris J. Lav, Center on Budget and Policy Priorities.
South Carolina Governor More Concerned About Election Year 2012 Than Fiscal Year 2009? The Tax Justice Digest, 12/12/2008.
Kentucky Coping With Economy, Tom Hale, Associated Construction Publications, November 4, 2008.
Fix Michigan's Budget Mess Now, Michigan State AFL-CIO eActivist Network,
Cigarette tax hike can help state, Sarasota Herald Tribune, 12/12/2008.
Smoking Facts for the State of Michigan, Michigan Residents 2005.
Tobacco Tax Increase – What’s Wrong with South Carolina??
Bush administration opposes legislation to give FDA authority to regulate tobacco products..

Related news brief: Tax the hell out of all tobacco products until they disappear..; Kentucky considering increase in cigarette tax..;
Virginia Governor Kaine Proposes a 30 cent tax increase in cigarette tax..

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