Raise cigarette tax?: No
It's the wrong way to balance the budget, says ex-House leader
BY DICK ARMEY
The war on smokers rages on. New York will soon be home to the highest cigarette tax in the nation if a proposed $1-a-pack cigarette tax increase becomes law. The hike would put the total government tax at $3.66 per pack in New York - and even higher in New York City. Being sold as a budget fix, this attempt to cover up excessive state spending must be stopped.
When it comes to the budget, New York has a spending problem, not a revenue problem. The state controller recently said that Gov. Pataki's proposed budget will put taxpayers in $7.9 billion of red ink over the next two years.
Looking to cover this giant spending increase, the governor is turning on the state's smokers, optimistically estimating the tax hike will yield upward of $300 million. But cigarette tax increases are an unstable and disappointing form of revenue - and New York knows this from experience. Today, four years since New York State and City raised their taxes to $1.50 a pack, the state raises about 14% less from the cigarette tax than when the tax was lower.
If the $1 cigarette tax hike is passed, a carton of cigarettes would cost $19.29 more than in neighboring states and $37.89 more than cigarettes found on the Internet. It would push even more consumers to the Internet or to bootleggers, further decreasing tax revenue. The Cato Institute found that in 2003 about half of all cigarettes consumed in New York City avoided state and city excises.
As consumers move to these alternative sources, convenience stores and gas stations - largely operated and owned by small businesses - lose sales, and the whole state economy suffers. Clearly a lose-lose situation.
The burden of this new tax will disproportionately fall on those who can least afford it, upping the annual tax burden on pack-a-day New York smokers - many of them low-income individuals - from $970 to $1,335.
It is hardly fair to enrich state coffers by penalizing the poor for their legal, private lifestyle choices. Public health arguments aren't a basis for equitable and pro-growth tax policy. If you accept that logic, then why not a safety tax on motorcycles and a fat tax on fried food?
Before Gov. Pataki attempts to cover the state's spending problems by passing the buck onto low-income smokers, he should recall recent history. He can only address the budget problem by controlling spending, not by blowing smoke at the taxpayers.
Armey, the former House majority leader, is chairman of FreedomWorks, a nonprofit grass-roots issue advocacy organization.
