S.C. Statehouse Report
Sunday, Sept. 5, 2004
VIEW: http://www.statehousereport.com/columns/04.0905.cigarette.htm

Cigarette tax hike is market-based approach
By Andy Brack
SC Statehouse Report

SEPT. 5, 2004 -- From a public health perspective, there's no really good reason for keeping taxes cigarettes low.

Low taxes on cigarettes means they're more affordable, which translates into more people who smoke. Higher taxes mean cigarettes cost more, which discourages people from smoking - particularly the young and those with lower incomes, according to the American Cancer Society.

The question of whether South Carolina's lawmakers have the gumption and foresight to raise the state's abysmally low 7-cent-per-pack cigarette tax begs the question: Is our state really serious about cutting the smoking rate, which would improve people's health, extend lives and reduce overall health costs at hospitals and other medical facilities?

If the answer is yes, raising the cigarette tax is a great public policy solution. Not only would it lead to improved health, but it would raise money to offset double-digit rising health costs for a growing senior population.

But if lawmakers don't want to improve public health, they need to be honest with voters and let them know that creating a healthier South Carolina isn't their priority.

For years, lawmakers have been saying a big reason they didn't want to raise cigarette taxes was because state revenues from cigarettes would drop because people would flood into other states to buy cheaper cigarettes.

Economically, that argument has never made sense. If, for example, the tax merely doubled to 14 cents and half of the smokers in South Carolina went over state lines to feed their nicotine habit, the state would still receive about the same amount of revenue. But somebody from Columbia isn't going to drive 100 miles to buy a pack of Marlboros.


McLEMORE'S WORLD: Padding the books

FEEDBACK: On retro vs. Metro

SCORECARD: Who's up and down



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Now a new study shows the argument is politically false too. According to the American Cancer Society, Georgia raised cigarette taxes from 12 cents to 37 cents a pack in July 2003. In the year since, the outflow predicted by anti-tax advocates just didn't happen:

  • Georgia's tax revenues from cigarettes rose from $111 million in 2003 to $227 million in 2004.

  • During that time, Georgia smokers didn't flood into South Carolina to buy cigarettes, as reflected in South Carolina's cigarette tax revenues. For the last three years, these tax revenues have actually dropped - from $26.4 million in fiscal year 2002 to $25.4 million in fiscal year 2004.

In other words, Georgia's experience shows the argument that South Carolina will lose revenues if it raises the cigarette tax just doesn't hold water.

So here's what will happen next year:

  • A coalition of health care groups that advocates a cigarette tax increase will push hard for it. It won't suggest where increased revenues should be spent, but sources say they hope the money will be spent to offset increasing Medicaid costs.

  • Unless pressured by lots of people, state lawmakers will figure out new creative arguments about why they can't raise the cigarette tax - even though more than 30 states have raised it. Among those that raised the tax are several in the South - Alabama, Arkansas, Georgia, Louisiana and Tennessee.

  • One argument they'll use is they won't make any changes in cigarette tax rates unless there is reform to Medicaid or some other program. Others will trot out a no-tax-hike pledge that a majority of lawmakers have signed. And others will say because Gov. Mark Sanford will veto any stand-alone tax hike, there's no point in getting into the battle.

Let's hope none of these insincere arguments carry the day. Instead, let's hope the state's Republican leadership will fight to marry a great public health benefit (lowering health costs by reducing smoking) with the core GOP principle of market-based solutions.

Raising taxes on cigarettes doesn't take away anyone's right to smoke. But if Republicans use a higher tax as a market-based incentive, more people will kick the habit and save their lives. In the meantime, the state will be able to generate more revenue to pay to help even more people to become healthier.


9/5: Padding the books

This week's cartoon by our Bill McLemore:

8/29: Retro vs. metro is the battle

To the editor:

Really nice piece (Statehouse Report, 8/29). Maybe you could have softened the "using the dangers of terrorism and war to..." or expressed this as a summary of the book. But, the conclusions bring it back to center. It is a rural versus metro battle. Funny thing, the Internet and incredible communication tools that are developing will help to merge these two kingdoms. There is a lure for people to return to smaller towns for quality of life reasons. They will still be able to be connected to "metro" by quickly improving electronic means. This migration is some time away however.

[That's a] big point these retros never admit; metro supplements their very existence through cash flows back to poorer areas as you mention. South Carolina gets $1.40 back for every dollar it sends to Washington. What a deal! And yet politicians make hay blasting Washington. If I were Connecticut, I'd be mad as hell for supporting "retro" and being demonized at the same time. It is time for a little intellectual honesty for sure.

-- Jim Brooks, Greenville, S.C.


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Here's a "thumbs up" and "thumbs down" related to various political events from the past week:

Thumbs up

Tucker Eskew. The Greenville native is showing what he can do as one of the GOP's best spin doctors during the Republican National Convention.

Thumbs down

Mark Sanford. The neverending one-upsmanship our governor carries on to show he's frugal is getting worn. Earth to Sanford: You're governor. You need to look like it, not live in the pool house and look for laudatory editorials about how great you are for pooling it.

Lobbyists. Fewer lobbyists filed ethics reports because of a reinterpretation of state law. We should have more openness and filing, not less.

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The above version of S.C. Statehouse Report is the free edition. Our paid version, which costs about $100 per month, offer a weekly legislative forecast packed with information that can keep you and your business on the cutting edge.

Notes veteran lawmaker Sen. Glenn McConnell: "Statehouse Report gives an inside practical report of weekly problems with and progress of legislation. It reviews the whole landscape."

In each issue of Statehouse Report, you'll get::

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