Cigarettes are an easy and acceptable target for lawmakers to tithe, so they do. Jump to full article: Los Angeles Times, 2009-06-14 Author: Nicholas Goldberg
Intro: One of the few state taxes that politicians have talked about raising is the tobacco tax. California's is currently set at 87 cents a pack (and hasn't been raised in a decade); this year, the Legislature will consider raising it to $2.97 a pack, which would bring the cost of a pack of cigarettes to more than $7.00. Sponsors of the bill estimate that the tax hike would raise about $2 billion.
How does the tobacco tax work? Who does it help and who does it harm? Below, some questions and answers to help frame the debate. . . .
So this is a no-brainer, right? Raise the tax. Solve the budget crisis. End smoking. It's that easy.
It's not quite that simple.
For one thing, there's a fundamental conflict in the tobacco tax: The more effective it is at discouraging smoking, the less revenue it brings in. Theoretically, if prices get pushed up high enough, so many people will stop smoking that revenues would decrease, eventually to zero if everyone were to quit.
Is it possible to predict what the effect of a price hike will be?
Surprisingly, it is. . . .
Is that a reasonable objection?
It's certainly true that tobacco taxes are regressive. On the other hand, poor smokers are also more likely to benefit, because they are more likely to quit as a result of the tax.
What if people are too addicted to quit?
In most cases, they'll just pay the higher cost. But opponents warn that tobacco taxes create incentives for black markets, especially if there are large price differentials in nearby areas. In some cases, people will cross state borders, or even national borders, to buy or smuggle cheaper cigarettes. As taxes go up, it makes economic sense to purchase cigarettes on Indian reservations, where the taxes often do not apply.
So what's the bottom line?
There aren't that many taxes that do good while raising money. The gas tax, which discourages driving, is another example. Don't rule them out!
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