Policy Documents

Research & Commentary: South Carolina Cigarette Tax Ignores Real Budget Problems

May 12, 2010

South Carolina Gov. Mark Sanford’s veto of a 50-cents-per-pack cigarette tax hike shows he understands such tax hikes are bad for the state’s economy and bad for all of the state’s taxpayers, not just those who smoke.

Targeted tax hikes such as those placed on alcohol, tobacco, and other “sinful” products take more money from the pockets of the state’s most financially stressed citizens and punish local businesses. And the reality is that raising any tax in the current economic climate is bad for a state’s economy.

Many lawmakers and nonsmokers inaccurately view cigarette taxes as an easy source of revenue that affects only those who smoke. But that’s not true. Research shows states with higher sin taxes have higher overall tax burdens. That’s because cigarette and other “sin” taxes eventually dry up — but the bloated government they funded doesn’t get any smaller. While targeted tax increases might temporarily prop up an increasingly expensive government, all taxpayers end up having to pick up the tab.

Sound policy means avoiding taxes that distort the market, burden the most economically vulnerable citizens, and increase the size of government. Instead, lawmakers should consider a long-term budgetary fix by implementing spending reforms, as Gov. Sanford has suggested. Without restraining spending and reforming the way government operates, no amount of taxes will ever be enough.

The following articles offer additional information on cigarette tax hikes.

 

South Carolina Senate Talking Tax Hikes
Governor Mark Sanford Vetoes Tobacco Tax Increase
http://www.atr.org/south-carolina-senate-talking-tax-hikes-a4740
http://www.atr.org/governor-mark-sanford-vetoes-tobacco-tax-a4919
Patrick Gleason of Americans for Tax Reform applauds Gov. Sanford for his veto of a regressive cigarette tax hike and warns of the unintended consequences of raising cigarette taxes instead of cutting spending.

Research & Commentary: Top Ten Reasons Not to Raise Tobacco Taxes
http://www.budgetandtax-news.org/article/25987/
This Heartland Institute Research & Commentary explains how targeted tax increases on items such as cigarettes push sound fiscal policies and real budget reforms to the public policy back burner.

NTU to South Carolina Legislature: Sustain Veto of Tax Hikes
http://www.ntu.org/governmentbytes/ntu-to-south-carolina.html
This letter from John Stephenson, state government affairs manager for the National Taxpayers Union, urges the South Carolina legislature to sustain Gov. Sanford’s tax hike veto. Stephenson points out, “While some see cigarettes as easy targets for taxation, the reality is that tobacco tax hikes are very burdensome to small businesses and the poor.”

Poor Smokers, Poor Quitters, and Cigarette Tax Regressivity
http://www.budgetandtax-news.org/article/19564
Dr. Dahlia Remler of the Department of Health Policy and Management at Columbia University rebuts the argument that cigarette taxes are not regressive.

Cigarette Tax Hikes Burn Hole in State Coffers http://www.app.com/article/20081012/OPINION/810120325/1030/OPINION
Gregg M. Edwards, president of the Center for Policy Research of New Jersey, reports the state brought in less revenue after its cigarette tax hike than was coming in before the hike was implemented.

Debunking the “Tax Thee, But Not Me” Myth: Five Reasons Why Non-Smokers Should Oppose High Tobacco Taxes
http://www.ntu.org/main/press_issuebriefs.php?PressID=1001&org_name=NTU
According to this National Taxpayers Union briefing, “The per-capita state and local tax burden in high-tobacco tax states is 8 percent above the national average, while the general tax bill for residents of low-tobacco tax states is 15 percent below the national average.”

Research & Commentary: The Best and Worst Ways to Eliminate a Budget Deficit http://www.budgetandtax-news.org/article/24760/
This Heartland Institute Research & Commentary provides a concise rundown of “dos and don’ts” for dealing with budget deficits and preventing them from happening in the future.

Six Reasons Not to Raise Tobacco Taxes
http://www.budgetandtax-news.org/article/13816
Economist Dr. William Anderson of the Oklahoma Council of Public Affairs outlines six pitfalls of higher cigarette taxes.