August 30, 2009 - In an effort to close a $1.8 billion budget deficit for the fiscal year that starts October 1, Michigan Gov. Jennifer Granholm has proposed a variety of tax increases, including a 25 cent boost in the cigarette tax (and similar taxes on other tobacco products) to bring them to parity with the cigarette tax. These changes offer a "Win, win, win" for Michigan.
Tobacco use remains the leading cause of premature death in Michigan. A 50-cent increase in the price of cigarettes will reduce kids' smoking by 6 percent, preventing 48,600 of Michigan's children from becoming smokers, and adult smoking by 3 percent. Equalizing OTP taxes with a $2.50 cigarette tax will reduce youth use by a whopping 47.5 percent.
A 50-cent increase will raise $108 million in new annual revenue, while equalizing the OTP tax with the cigarette tax increases will raise another $59 million. Every state that has increased tobacco taxes has enjoyed substantial and reliable increases in revenue. Plus, every 1 percent drop in the smoking rate will save Michigan $723 million in future health-care costs.
Lobbyists for gas stations and convenience stores claim that increasing Michigan's cigarette tax will cost the state revenue. They are flat wrong.
Money spent on cigarettes does not disappear when smokers quit or cut back, but is spent on other goods and services. A pack-a-day smoker who quits because of a state cigarette tax increase will save more than $1,000 per year on cigarettes and then spend that money on other things, including other products sold by convenience stores. If the smoker cuts back to half a pack a day, they will have more than $500 to spend in different ways.
Convenience store lobbyists argue that cigarette sales declines will reduce their related revenues and profits, but hide the fact that much of the money previously spent on cigarettes will be spent on many other goods sold by convenience stores. Unbiased economic studies show reducing cigarette sales in a state creates new jobs and improves the economy.
Democrats, Republicans and Independents strongly support raising tobacco taxes to prevent kids from smoking. A nationwide survey conducted by the Campaign for Tobacco-Free Kids found that 68 percent of voters supported a tax increase if dollars were used to prevent and reduce tobacco use. According to the Michigan BRFSS Surveillance Brief, almost 70 percent of Michigan adults support equalizing the tax on other tobacco products to parity with the cigarette tax.
Tobacco use burdens taxpayers. Current revenues from tobacco taxes ($1.1 billion) are dwarfed by the cost of tobacco use to Michigan's economy ($7.4 billion). Yet Michigan allocates only $3.6 million a year to the state's tobacco prevention program, which pales beside the $121 million that the Centers for Disease Control says is required for effective tobacco prevention and cessation here. Amazingly, some politicians are considering cutting this funding even further.
Our elected leaders should join Granholm and raise all tobacco taxes now. Dedicating even a small portion of the new revenue to Michigan's Tobacco Program to help tobacco users quit and provide tobacco prevention services in Michigan communities will raise money, reduce health care costs and save lives.
Michigan Petroleum Association/Michigan of Convenience Stores - negative consequences of cigarette tax increase..
Reference: Douglas (Cliff Douglas is director of the University of Michigan Tobacco Research Network): Tobacco tax boost will profit Michigan
Tax increases deter use and reduce health costs, Lansing State Journal, 8/23/2009.
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