Louisiana Lawmakers Propose Regressive Tobacco Tax to Fill Budget Hole

Published May 18, 2015

Louisiana lawmakers are proposing hiking excise taxes on cigarettes to help cover a looming $1.6 billion shortfall in the state budget.

The proposed tax hike would increase the tax on cigarettes from 36 cents per pack to 68 cents per pack, an 88 percent tax hike.

‘Doubly Regressive’

Institute of Economic Affairs Director of Lifestyle Economics Christopher Snowdon says the tax proposal is an attempt to balance the state budget on the backs of low-income individuals.

“All indirect taxes hurt the poor more than the rich,” Snowden said. “Cigarette taxes are doubly regressive, because smokers are disproportionately drawn from low-income groups.

“Two things in life are certain—death and taxes—but taxes should be efficient, effective, and fair,” Snowdon said. “Sin taxes on products that are disproportionately consumed by the poor meet none of these criteria.”

Snowdon says excise taxes on consumer goods such as tobacco are enacted to fill government coffers, not to help improve public health.

“All of these taxes are portrayed as health measures, but the reality is that they are stealth taxes,” Snowden said. “The demand for tasty food, like the demand for cigarettes and alcohol, is inelastic, and governments know that consumers will pay up. They are nearly always revenue-raising measures.”

Calls for Budget Flexibility

Pelican Institute for Public Policy President Kevin Kane says Louisiana lawmakers’ current problem is one of their own choosing.

“The broader issue that legislators really need to address is that there is very little flexibility in the state budget, so when they find themselves in a position like they do now, with a huge deficit, their ability to cut spending is actually more limited than you would think,” Kane said. “There are all sorts of parts of the budget that are constitutionally or statutorily protected, so it’s much more difficult to cut spending than it ought to be. So they run around looking for these desperate quick fixes, and raising the cigarette tax is a classic fill for a budget hole.

“If they don’t do something to correct the larger problem, these kinds of things will continue,” Kane said.

Kane says Louisiana lawmakers should examine the budget for ways to make more spending discretionary.

“One of the things these lawmakers need to do is really look at how the budget is structured, and give themselves a little more flexibility year to year, because it is wrong to be governed by legislatures of the past.”

Jen Kuznicki ([email protected]) writes from Hawks, Michigan.  

Internet Info:

Gary Lucas, Jr., “Saving Smokers from Themselves: The Paternalistic Use of Cigarette Taxes,” University of Cincinnati Law Review, https://heartland.org/policy-documents/saving-smokers-themselves-paternalistic-use-cigarette-taxes/