Hope For More Health Care Revenues Will Go Up In Smoke

Published September 16, 2008

Dear Editor:

Reporter Robert Gehrke points out the irony of Utah legislators expecting to get $50M in new revenues for health care initiatives by soaking cigarette smokers with $2.00 per pack excise taxes (“Jump to $2 a pack would raise $50M for health programs,” Salt Lake Tribune, September 13).

With lower-tax neighbors Wyoming and Nevada offering cheaper smokes, significant numbers of Utahans will start buying cigarettes out of state, leading to much less tax revenue than anticipated. This will also mean lost revenues for Utah gas stations and convenience stores.

The region has seen this before. In 2006, Washington state raised cigarette taxes to $2.03 a pack, only to find consumers sought lower prices on the Internet and across state lines. According to state experts, around 25 percent of all cigarettes smoked in Washington were not purchased within the state. That translates into a loss of roughly $200 million in state sales taxes.

In the 2008 Tax Foundation’s State Business Tax Climate Index, Utah ranks 17th in the five areas of taxation that affect business. Nevada ranked much better, at 3rd, and Wyoming ranked 1st.

Utah needs to consider more consumer-oriented health practices instead of relying on punitive actions against beleaguered smokers. The current strategy of “soak the smoke” taxation will only backfire when far less than $50 million in revenues are actually received.

Ralph W. Conner ([email protected]) is local legislation manager at The Heartland Institute.