Tuesday, January 6, 2009

Brummett: Smoke ‘em if You Got ‘em (UPDATE)

John Brummett writes an interesting blog post today after the big wigs in the news media hosted a pow wow with Gov. Mike Beebe, Speaker Robbie Wills, and Senate President Pro Tem Bob Johnson. I guess my invitation got lost in the mail.

Anyway, Brummett did some quick math skills in his head while listening to the governor and made an interesting discovery about Beebe’s proposed tax hike on cigarettes, confirmed later with a wink from the governor. Brummett blogs,

“We’re going to create three trauma centers and a statewide trauma system. It’ll cost $28 million. We’re going to raise the cigarette tax at least 50 cents a pack to do that. That’ll raise an estimated $71 million.

There’s a spare $43 million. We’re going to run that through the General Fund and appropriate it for Medicaid, for existing health programs and new ones, such as home health care and community mental health for kids.

Arkansas’ Medicaid money gets matched 3-to-1 by the federal government, even without special Medicaid money perhaps to flow from any federal economic stimulus.

In other words, Beebe wants to turn a 50-cent cigarette pack tax into a trauma system with $43 million left over that could be turned into nearly $170 million, which would plug our Medicaid holes, even expand Medicaid programs, and relieve pressure elsewhere on the budget in this time of uncertainty."

It seems Brummett thinks this is a smart move by Gov. Beebe to funnel a little extra money into the state coffers and squeeze a little extra out the feds in the process. However, it seems to me that the Gov. Beebe is raising taxes three times higher than what he needs to fund the program that he is promoting. If the state trauma system is needed, then okay but why tax smokers three times more than needed just because you can.

UPDATE – Rep. Steve Harrelson from Texarkana points out on his blog (which is a very good blog by the way) that the current 59 cents a pack tax in Arkansas is much lower than the $1.41 a pack in Texas, and it still would be lower with the proposed 50 cent increase. Hey, since Texas has no state income tax, I am all for modeling our tax system after theirs, but let's not pick and choose only the items taxed higher than ours.

UPDATE II - Although careful to not mention me by name, Brummett responds today with another post. You can click the link to read it but to sum it up, he likes the tax. Money quote, "Beebe said he’d heard that it’d require a $7 a pack tax to recover all the costs to government of tobacco-related diseases. " Hmm, so I guess this first 50 cents is just the start.

My compliant with this is really two fold. First, although it sounds like the story is starting to change, the original rational for the tax was the trauma system but the tax is much higher than needed for the program. Second, if the real reason for the tax is social engineering through taxation, then I disagree with this on political philosophy grounds. Our tax policy should not be designed to dictate what behavior the government feels is acceptable. If Gov. Beebe feels cigarettes are so bad for Arkansans, then have to courage to deal with this issue directly. Of course, he is not going to propose banning them or limiting their use; no one would sign on for that. So why is it acceptable to do this indirectly through our tax policy?


narrowcaster said...

Taxing cigarettes is as much of health policy to encourage the cessation of smoking as it is revenue/taxation issue. The Campaign for Tobacco Free Kids reports that for every 10 percent increase in the real price of
cigarettes reduces overall cigarette consumption by approximately three to five percent, reduces the number
of young-adult smokers by 3.5 percent, and reduces the number of kids who smoke by six or seven percent --

Jason Tolbert, CPA said...

Narrowcaster, I understand your point - taxing something reduces its use and cigarettes are bad. In fact, I think you would be hard pressed to find many who would disagree. But this does not lead me to support EVERY tax increase on cigarettes. According to the Arkansas Tobacco Control Board, the current tax cigarettes 59 cents a pack. Beebe’s proposal would almost double this.

My main point is that he is being disingenuous when he says that this is for the new trauma system. If that is the case, why is the proposal not a 20-cent a pack increase, which is more than enough to fund the trauma system? No, this is simply about raising taxes to increase state revenue and the trauma system is the excuse; and, since cigarettes are not popular, cigarette smokers are easy targets for the state.

Now if Gov. Beebe wanted to use the 50-cent a pack cigarette tax to do something like completely eliminate the state grocery tax, now that might be something I would support.

John said...

What does the taxation of cigarettes have to do with "trama centers" or medicaid programs, other than being an easy target? If these services are to be viable they should have an income source related to the service and a usage base that will support it. Auto accidents can cause blunt force trama, why not tax auto tags or registration?
Using narrowcaster's logic, instead of cigarettes, tax coffee, caffine is very bad for you and should be stamped out... it's a drug.
Cigarettes are a legal product for adults, kids can't buy them, but they can use them without penalty (???) it seems. Why punish adults whom have made the choice to smoke?
Yes, Beebe is very disingenuous and I'll take it a step further, DISHONEST!!!

narrowcaster said...

Not all government services need to be directly related to an income source. Most government sources are offered for the greater collective good.

From a policy perspective, it wouldn't be a bad idea to tax raise taxes on items that are bad for you-- Fatty foods and soft drinks to deal with obesity or cars that have the ability to go excessively fast (have you seen the aftermath of a collision where a car is going 120+ mph?). Both obesity and cars that speed excessively cost the public money (as well as people smoking cigarettes).

I agree with Jason that I would much rather see Gov. Beebe use the excess cigarette tax money to keep his promise to eliminate the grocery tax than to balance the state budget without making the necessary cuts.

John said...

Yes comrad, for the collective good. Give me a break! Most government services are a method to keep people beholden to the government and thus keep the elected officials in power.

Last time I checked, the State of Arkansas was running a surplus. No new taxes are needed at all! This state is grossly over taxing the people and wasting the taxes that are collected.

Governor Beebe is proposing new programs that this state can not afford. Once a government program is established, it never goes away, ever! Correction, the program could disappear, but the taxes used to fund it don't stop.

What this state needs is lower taxes and less government. However, I know I'm in the minority here, It's rare to see a new tax fail in this state.

I'm sorry, I recognize a control freak when I see one. Let people live their lives the way they want and stop trying to make people live the way you think they should. It's not your life!

narrowcaster said...

The problem with letting people live their lives however they want is that in general people take advantage of the less regulation costing the public. We let financial investors invest others money however they want and we end up withe Bernie Madoff bilking millions out of their money. We let the banks give out mortgages and loans to whomever they want without oversight and we have the government spending hundreds of billions to bail them out.

Zine said...

So, the government is again looking to fund programs on the vice of the governed. Rather than deal with the vice, the government would much rather people continue the vice and stuff its pockets with blood money. Gotta love government!

John said...

This is scary, to see a person expose the view that people can not be free to live their lives, they must be regulated and forced to live the way someone else determines.
In the examples given, Bernie Madoff did an already illegal act an bilked people out of billions of dollars.
As for the home mortgages, it was the government that basically forced banks to give out loans which the banks knew couldn't be repaid. So whom is the guilty party here, in this case, the U'S Congress, primarily Barney Frank and Chris Dodd.
By the way, it is a mistake to bail out all of these companies. Let them fail, that's how capitalism works. The only thing being accomplished with these bailouts is the mortgaging of the next generations future.
The key to our future, which Beebe doesn't see is smaller government, reduced government services which will happen anyway as we as a state / country will be bankrupted.