Tax chairman Lake says 'sin tax' increase is about preventing smoking, not raising revenue
Rep. Dennis Lake, R-Blackfoot, isn't money hungry, but he thinks other lawmakers may be.
Lake, chairman of the House Revenue and Taxation Committee, made waves in Idaho politics a few weeks ago when he said he would allow a hearing for a bill that would increase the tax on cigarettes in Idaho up to $1.50.
The Blackfoot Republican told IdahoReporter.com Wednesday that he sees the bills not as a way to raise revenue for state programs, but rather as a tool to help combat smoking in the Gem State. He also explained that it's possible that lawmakers eager to stave off cuts to pet programs or agencies might be more likely to approve the hike than in years past.
While Lake realizes that a boost in the tax – which sits at 57 cents per pack and is eighth-lowest in the nation - will mean additional money for the state, he says that he is more concerned with promoting health and discouraging smoking than raising additional tax dollars. "That's why they are bringing the bill," said Lake, referring to groups backing the bill. "What do they care about revenues? They are more interested in helping people. "
Data suggests that Lake is correct in his assessment that increasing taxes on cigarettes eventually leads to lower smoking rates. The Campaign for Tobacco-Free Kids (TBF), a group dedicated to developing policy options that prevent youngsters from taking up smoking, says that hikes increase revenue while decreasing the number of smokers, thereby lessening potential costs to the public health caused by smoking. TBF believes that the $1.00 increase per pack for Idaho would save about $230 million in health care costs and would force as many as 6,200 Idahoans to stop smoking.
But as the state faces a budget shortfall that could reach $400 million, Lake is counting on some anti-tax lawmakers to switch votes and approve the hike to bolster state funding. “I’m guessing in a year like this, we’ll have more support,” explained Lake.
But just how much could those increases contribute to the state’s general fund? One report suggests that if Idaho were to add $1.00 to its cigarette tax, the state could gain as much as $46 million in revenue on an annual basis.
But that tax increase would come at a cost paid mostly by low-income residents of the state. A 2007 Heritage Foundation study relating to an expansion of the State Children’s Health Insurance Program, or SCHIP, found out who really pays when governments use cigarette tax hikes to fund government. Data suggests that 28 percent of the people who smoke make less than the federal poverty level. Another 26 percent of smokers are considered poor, making between 100 and 200 percent of poverty level guidelines.
Cigarette taxes don’t always provide a stable funding base. In 2005, Idaho saw $45.7 million in revenue from cigarette taxes alone. Since then, the state’s revenue stayed mostly steady, with minor variations in revenue amounts, until fiscal year 2010, when the state saw a 10.58 percent drop in total cigarette tax revenue. That decrease reduced the state’s revenues by more than $4.6 million to a total of $39.6 million.
Several lawmakers believe that government should engineer public tax policy to influence citizen behavior. Of those legislators, Lake isn’t concerned. “To each their own,” he said. “Legislators get to vote their conscience and their district and that’s fine.”
The head of the tax committee might face some opposition over the move from members of his own panel. Rep. Gary Collins, R-Nampa, serves as the vice chair of the committee and says that he is willing to hear the tax hike proposal, but is skeptical. “I don’t have a specific yea or nay on it,” explained Collins, “though I’ve never voted for a ‘sin tax’ increase.” Collins isn’t entirely comfortable with discouraging certain behaviors through taxes. “It’s just another regressive tax,” he concluded.
Another Republican on the committee, Rep. Lenore Hardy Barrett, R-Challis, believes a tax hike on cigarettes wouldn’t stop people from smoking. “Having been a smoker, I know people will pay the price,” said Barrett. “You just won’t buy a quart of milk or something else to pay for it.”
Rep. John Rusche, D-Lewiston, says his caucus will likely be split on the issue. Rusche told IdahoReporter.com earlier this year that though the proposal will cost citizens more – and particularly those in lower income brackets who have higher smoking rates – it might not be a terrible idea. “It will go a long way to promote their good health,” said Rusche, though he stopped short of backing the idea. “This is a problem that requires investigation.”
The proposal will be heard sometime during the 2011 legislative session, set to begin in January.