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Commentary

Meathead Public Policy


     
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Second chances are rare in politics, but California’s voters get one come March 7th. Ballot Proposition 28 would repeal 1998’s Prop. 10, the Orwellian-named Children and Family Initiative that raised the state excise tax on cigarettes by 50 cents per pack to fund a variety of noble-sounding healthcare and educational programs targeting preschoolers. That measure, better known as the “Meathead and Moses” initiative, after its two high-profile supporters, Rob Reiner and Charlton Heston, passed by about 80,000 votes, a margin of less than one percent of the total votes cast.

The state’s healthcare, educational, and public relations professionals are understandably aghast: if Prop. 28 passes they stand to lose a financial goldmine estimated to amount to $680 million per year which, they say, is critically needed to prevent expensive and tragic health problems, such as smoking-related premature births and sudden infant death syndrome. However, if the experience with Prop. 99, the 1987 initiative that tripled the state excise tax from 10 cents to 30 cents per pack, is any guide the loot will be spent on much more dubious activities mostly benefiting the professionals themselves.

The arguments advanced by Prop. 28’s opponents rest on the same faulty reasoning that produced the tobacco industry’s $248 billion settlement with the states a little more than a year ago: it is the notion that smokers impose costs on others that, in all fairness, they should be required to repay. Leaving aside for the moment the fact that the same could be said of people who consume “too much” fat or “too much” sugar, shouldn’t smokers pay their way? Of course they should—and they do. Indeed, they are already more than paying their own way.

Many people assume that smokers require more health care than nonsmokers. But, stop the presses: we all get sick, have medical expenses, and eventually die whether we smoke or not. Hence, while smoking can affect the timing of health care expenditures, it doesn’t follow that smokers’ lifetime medical bills are larger than those of nonsmokers. In fact, the opposite is more likely to be true. If nonsmokers live longer than smokers, then it is they who will have the largest health care costs over their lifetimes and it is they who will incur most of their medical expenses after the age of 65 when they become eligible for taxpayer subsidies through Medicare. Recognizing this simple point leads to the conclusion that the nation’s health care costs would increase if everyone stopped smoking.

Because they don’t live as long, smokers also collect less Social Security than nonsmokers. That represents a saving to the federal government and is another subsidy to nonsmoking taxpayers. While it may seem ghoulish to argue that taxpayers gain from smokers dying before they become eligible for Medicare or before receiving their full Social Security benefits, advocates of higher taxes on smokers in order to defray the costs of treating smoking-related disease cannot have it both ways. If the tobacco industry’s critics want to base their case on the lower life expectancy of smokers, they must also acknowledge the subsidies shorter lives entail.

The blunt truth, according to The Economist, is that smokers for the most part die near the end of the productive years of their lives, after they have made full contributions to publicly financed health care and pension schemes. But it kills them before they live long enough to place too heavy a burden on those schemes. The result: “smoking is good for your health spending.”

Rather than being a drain on federal and state budgets, smokers are net contributors. Jane Gravelle of the nonpartisan Congressional Research Service estimates that smokers add almost $35 billion to the federal government’s coffers every year in the form of the cigarette taxes they now pay and in the reduced claims they make on taxpayer financed health care and Social Security programs. Based on pre-Prop. 10 tax rates, Harvard Law School economist Kip Viscusi calculates that California smokers subsidize the state to the tune of 18 cents on every pack of cigarettes they buy. And, it is worth emphasizing, these contributions are made primarily by low- and middle-income individuals: families earning less than $30,000 pay a staggering 43 percent of all tobacco taxes.

Smokers have already seen the price of a pack of cigarettes rise by almost $1 since 1997, largely as a result of increases in state excise taxes and the so-called settlement tax—the passed-on costs of the settlement between the tobacco companies and the state attorneys general. The federal excise tax on cigarettes rose 10 cents this year and will go up by another nickel in 2002.

Enough is enough. Federal and state governments collect billions in taxes every year from smokers and save billions in Medicare and Social Security payments. Smoking imposes no costs on the nation’s taxpayers that go uncompensated. The contention that Prop. 10’s 50 cents tax is necessary to recover such costs is simply wrong. “Meathead and Moses” ought to be seen for what it is: an opportunistic money grab from a politically vulnerable group of taxpayers.


William F. Shughart II is a Research Director and Senior Fellow at The Independent Institute, J. Fish Smith Professor in Public Choice in the Jon M. Huntsman School of Business at Utah State University, and editor of the Independent Institute book, Taxing Choice: The Predatory Politics of Fiscal Discrimination.

Taxing ChoiceFrom William F. Shughart II
TAXING CHOICE: The Predatory Politics of Fiscal Discrimination
So-called “sin taxes”—the taxing of certain products, like alcohol and tobacco, that are deemed to be “politically incorrect”—have long been a favorite way for politicians to fund programs benefiting special interest groups. But this concept has been applied to such “sinful” products as soft drinks, margarine, telephone calls, airline tickets, and even fishing gear. What is the true record of this selective, often punitive, approach to taxation? Learn More »»






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