Tax Hike is Unfair to Smokers

A group calling itself the Coalition for a Healthy Future has a suggestion to help the poor pay for medical care: raise their taxes.

Well, that’s not how the Coalition describes their plan. The group wants to more than quintuple Missouri’s cigarette excise tax, to 97 cents a pack, and use the proceeds to help finance Medicaid, the government health care program for the poor. The proposal, which the group hopes to put on the November 2006 ballot, is bad policy. It’s regressive, and it’s unfair to smokers. Voters should reject it, just as they rejected a similar tax hike in 2002.

Excise taxes are inherently regressive because the poor spend a larger share of their incomes on consumer goods. But cigarette taxes fall especially hard on poor Americans. According to a 2002 Centers for Disease Control survey, 33 percent of adults with incomes below the poverty line smoked, compared with only 22 percent of other adults. The Committee for a Healthy Future’s plan would raise taxes the most on precisely the people they’re trying to help.

But don’t smokers impose higher costs on society? Advocates of higher cigarette taxes point out that the health problems associated with smoking are treated at state expense by Medicaid. It’s only fair, they reason, that smokers pay for those higher costs through higher taxes.

It’s a good argument. The only problem is that it isn’t true. It’s true that treating smoking-related illnesses costs money. But that ignores the tragic reality that smokers die younger than non-smokers. As a result, they impose fewer costs on the retirement system. It’s hardly fair to demand that smokers pay for the costs of smoking-related illnesses while ignoring the benefits they never live to collect.

But in fact, the value of benefits not received by smokers is substantial. According to a 1998 study by Jane Gravelle of the Congressional Research Service, after accounting for the lower costs of smokers’ retirement benefits, state governments nationwide saved about $2.1 billion each year due to smoking. And that’s before considering the added revenue from excise taxes. The federal government saves even more as a result of smoking—$29 billion annually, according to Gravelle’s calculation.

Obviously, smoker deaths are nothing to celebrate. But the point is that smokers are already paying more than their fair share for the services they receive. They don’t owe the rest of us anything.

It’s no secret that the real goal of cigarette tax hikes isn’t to shore up Medicaid or compensate for the health costs of smoking, but to encourage smokers to quit. Mayor Michael Bloomberg, who signed a bill giving New York City among the nation’s highest cigarette taxes, has said as much. When signing the 2002 legislation, he stated that his purpose was not to raise revenue, but to “save peoples’ lives.” If it were up to him, he said, he would “raise the cigarette tax so high the revenues from it would go to zero.”

The American Heart Association, a member of the Coalition for a Healthy Future, agrees. “We, in the public health community, already know the value of increasing state tobacco taxes, particularly in terms of saving lives,” said Katherine Krause, executive vice president of Advocacy.

Saving lives is a worthy goal, but it shouldn’t come at the price of personal freedom. Fortunately, average Missourians understand that, however much non-smokers might disapprove of the habit, it’s not right to try to force others to change their behavior. Voters rejected a 2002 proposal that would have raised taxes by 55 cents per pack. If the new proposal makes it onto the ballot next year, voters should reject it too, making it clear that in a free society, people have a right to smoke if they choose to. State government shouldn’t be using tax policy to manipulate smokers into changing their behavior.

Timothy B. Lee is an editor at the Show-Me Institute.