Tobacco tax hike more motivated by politics than policy

An effort to raise taxes on cigarettes illuminates not just a pair of interesting public policy questions, but also a political battle that has taken on personal connotations for its sponsor.

Democrat State Rep. Karen Carter Peterson, the second in command in the House, plans to offer a bill to increase the state’s tobacco tax a dollar per unit to $1.36. This is on top of a projected increase in the federal tax of another dollar. She said it could raise in the neighborhood of $200 million a year just off cigarette pack sales to fund state coffers, although she does not propose that it specifically go towards health care. She opined that it would constitute “fair share” of health costs of these products to do this and could be used to avoid some budget cuts this year proposed by Republican Gov. Bobby Jindal.

There are a few policy dimensions to this idea. First, if used as a tactic to raise revenue for government, it is an unstable and unreliable means. While “sin taxes” may be the least objectionable form of government expropriation of the people’s resources because they simultaneously discourage presumed sub-optimal behavior, this concept creates an internal contradiction: discouraging the activity limits its usefulness as a revenue-raising agent because the decline it brings in behavior concurrently reduces the revenue. In other words, particularly in the long run, any revenue increases probably will be minimal. So if this just another way to raise revenue, it’s not going to be very effective.

Also, the best public policy tries to connect a revenue source to its public policy purpose. In this case, that implies that the revenue should go into health care spending, and even more directly to activities related to the presumed ills caused by smoking, But Peterson did not make that explicit which makes the budgeting process and its execution less predictable, increasing the potential for distracting adjustments in the middle of a fiscal year. It also can lead to political posturing, the mode in which former Gov. Kathleen Blanco operated when she championed a similar idea.

Still, one could argue that the health and fiscal benefits alone should justify such a tax; that is, a presumably healthier population encouraged by this move should reduce costs to government and by the private sector in treatment of diseases allegedly induced by smoking. Unfortunately, from a fiscal perspective, this isn’t even true. Studies show that while smoking cessation in the short run would cause health care costs to come down, in the long term health care costs as a whole probably would increase, simply because longer lives bring additional and typically even more costly medical complications. Bluntly, people dying earlier from believed smoking-related causes cost the health care system less than if they lived longer.

Understanding these aspects of the issue leads one to conclude that the motivation behind this idea really has a political, if not personal, basis. If Peterson really were concerned about smoking and general tobacco use, from the moment she was elected she would have stumped for this as a health issue. Instead, she catches this religion in the second year of a governor’s administration that has cut taxes and specific pet projects from legislators and now proposes to do the same for general government spending.

Peterson, it must be understood, like a significant portion of the Legislature, wants more, not less, government control over people’s lives. She, and others, have become increasingly upset with Jindal’s support of tax cuts, his refusal to consider tax increases (which has lead him to state he will not support this), his past vetoes of legislators’ pet projects, his present cuts in spending generally identified as welfare-related, and (if never spoken then surely in the background) Jindal’s unsteady handling of a legislator pay raise to full-time status issue last year that ended up with his veto and plenty of bad publicity for legislators. Therefore, this measure not only accomplishes the goal of, on the surface, appearing to improve public health and avoiding spending cuts, but at a deeper level satisfies a desire for bigger, more intrusive government, yet at the most basic level of all is an attempt simply to defeat Jindal for its own sake. Peterson’s challenging rhetoric implying she could defeat a veto lends credence to this belief.

As this bill wends it way through the legislative process, its argumentation will focus on matters of health, finance, and government power over people’s lives. But beneath it all, recognize it represents a struggle between those who want to empower government against those who wish to empower people, and that for some in the conflict it will take on very personal undertones.