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Commentary: Tax 'em if you got 'em

This article first appeared in the St. Louis Beacon, May 20, 2010 -  Now that South Carolina has raised its state excise tax on cigarettes by 50 cents a pack, Missouri ranks dead last in the nation in terms of taxes extracted from the sale of cancer sticks. Rhode Island, which ranks first, levies a state tax of $3.46 a pack. By contrast, Missouri collects 17 cents for a similar sale. The overall average for the 50 states and the District of Columbia is $1.42.

New York City has the highest combined state-local tax at $4.25; Chicago is second at $3.66. St. Louis limps in at a pathetic $.24 -- 17 cents for the state + 7 for the city. Liberals -- or, to use their currently preferred designation, progressives -- are duly alarmed by our anemic rates of vice taxation. And to be honest, in this instance they do raise a point worth considering.

There's little to be said in defense of the product: Cigarettes have long been understood to be both addictive and lethal. To the extent that both city and state face crippling budget deficits, nudging the local tax on them closer to the national average would seem to be a reasonable way to ameliorate our fiscal woes without slashing public services.

Some proponents of the tax hike have labeled the state's current rate a "disgrace." They argue that higher taxes = lower usage, thus improving public health while consequently reducing health-care costs. However, they must anticipate that not everyone will abandon the killer weed because they plan to spend expected new revenues on a variety of worthwhile projects. KMOX talk show host Charles Brennan, for instance, wants to devote the money raised to keeping convicted felons in prison rather than granting them early release as a proposed cost-cutting measure would do.

Though I'm not sure I could ever agree that low taxes are a "disgrace," I must confess that this is a tempting revenue stream -- one that would be painless to the 76 percent of adult Missourians who don't smoke. According to the Department of Revenue, the state took in $113,988,090 in cigarette taxes in Fiscal '09. At 17 cents a pack, that equates to more than 661 million packs sold. Raise the tax 50 cents a pack, and you'd figure to realize an addition $330.5 million annually, while still keeping the rate competitive with, or substantially below, each of the eight bordering states.

There are, of course, obstacles to harvesting this cash cow -- not the least of which is the Hancock Amendment; the constitutional provision that prohibits the state from imposing most new taxes without a plebiscite. Twice in the last decade voters have been asked to hike the tobacco tax; and each time they've rejected the proposal, albeit narrowly.

One reason may be a general aversion to taxation, but another may be a simple sense of fairness. Why, for instance, should smokers be required to pay to house Brennan's felons? Are there any reliable studies you know of that link smoking to violent crime? Wouldn't a surcharge on bullets and booze make more sense in that regard?

And what of the supposed health benefits of higher taxation? The correlation between smoking and tax rates is at best imperfect. Though there is a general tendency for higher smoking states to have lower tobacco taxes, the correlation is too loose to infer causation. In fact, the causal arrow may point in the opposite direction: more smokers = greater resistance to raising tobacco tax; rather than higher taxes = less smoking.

Five states -- Alaska, Arizona, Maine, Maryland and Michigan -- charge exactly $2 a pack, tying them for 11th place on the taxation table. In terms of percentage of smokers, they rank 6th, 37th, 22nd, 45th and 12th, respectively. California has the second-lowest smoking rate in the nation but falls well within the lower half of taxation at 33rd overall. The No. 1 tobacco-taxing state, Rhode Island, ranks a middling 31st in the incidence of adult smoking.

The projected public health savings of increased tobacco taxation rely on two premises: that a healthier population will require less recuperative care and that higher per pack cost will discourage young people from taking up the habit. Both assertions are dubious at best.

The dirty little secret in the health-care equation is that smokers perform the actuarial favor of dying young, thus relieving society of the burden of their long-term maintenance. Not all smokers die of their addiction, but those who do tend to pay Social Security and Medicare taxes throughout their working lives, then check out before they can collect much -- if any -- of the benefits they've accrued. It's a lot cheaper to bury a middle-aged smoker than it is to provide him with assisted living accommodations decades later.

As for the kids, the ones I see seem perfectly able to acquire cell phones, $100 sneakers and, in some cases, pot or other controlled substances. The beauty of the typical adolescent economy is that it consists of completely discretionary income. Absent dependents -- including their selves -- teens are free to spend their cash as they choose. If smoking is deemed to be fashionable, they'll simply absorb the extra 50-cent hit and get back to the urgent task of loitering around the mall.

I sense at the core of Missouri's reluctance to hike cigarette taxes a basic sense of fairness and a respect for personal liberty. After all, only 24 percent of eligible voters smoke and it took over twice that number to defeat the last two ballot initiatives.

I suspect that many opponents feel that if cigarettes are legal and adults choose to use them, the government has no role in that private decision. Hospitals, libraries and prisons are all socially useful institutions, but it's unfair to fund them on the backs of an addicted -- but law abiding -- minority.

Yet, if a commodity is trading everywhere else at a higher market price, it makes sense to adjust the local cost range in that direction to garner desperately needed public funds.

As of this writing, cigarettes remain a bargain in Missouri. Given the nature of the product and the risks at play, that's a Devil's bargain for sure...

M.W. Guzy is a retired St. Louis cop who currently works for the city Sheriff's Department. His column appears weekly in the Beacon. 

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