This legislative session legislators are pushing for a tobacco tax increase as a funding source for various projects.
To be sure subsidizing rural doctors or adding to the property tax relief fund are both well-intended projects. Actually all of these bills that call for an added tobacco tax (HB 1289 HB 1666 HB 1876 HB 2377 and SB 1336) are arguably worthwhile programs.
But adding a tobacco tax causes a headache of problems that should not be overlooked.
First is that it needs to be made clear who the winners and losers are in the tobacco industry regarding this tax. At first look one would think a company like U.S. Smokeless Tobacco would oppose an added tobacco tax so why dont they? Because this tax only falls on the shoulders of their competitors.
UST continues to fund a multi-million dollar nationwide effort to get states to switch to a weight-based tax on smokeless tobacco products (by the can) from the current ad valorem (price-based) tax. This means that alternative products which are now cheaper than UST products will be forced to raise their prices. UST will have an opportunity to gain back their market share that has shrunk considerably over the last few years.
If Texas consumers deserve anything out of this legislative session especially during the tough economic times its more product options at lower prices not a tobacco tax that actually works to help Big Tobacco.
But tobacco interests aside lets look at the practicality of increasing the tobacco tax.
First Democrats like to argue for progressive taxes but an added tobacco tax does just the opposite. Since tobacco users come from lower income groups a tax increase disproportionately taxes the poor something no legislator should allow in todays economy .
Second this hurts small business. A large number of small businesses including gas stations and convenience stores rely heavily on the sale of tobacco products. Not only would demand go down as prices rise but the added revenue does not transfer to businesses. A larger tax then has a negative effect on small business.
Third there is no guarantee that an added tax will bring in greater revenue for the state. Much like lottery revenue which has dropped significantly and has not met revenue expectations a tobacco tax could see the same results. The state cannot get into the habit of relying on a tobacco tax to fix the true problem which is overspending by the state government.
Texas legislators should be cautious about supporting tobacco tax increases. Though often the easiest tax for voters to swallow its consequences are real and they are the last thing we need right now.
This legislative session legislators are pushing for a tobacco tax increase as a funding source for various projects.
To be sure subsidizing rural doctors or adding to the property tax relief fund are both well-intended projects. Actually all of these bills that call for an added tobacco tax (HB 1289 HB 1666 HB 1876 HB 2377 and SB 1336) are arguably worthwhile programs.
But adding a tobacco tax causes a headache of problems that should not be overlooked.
First is that it needs to be made clear who the winners and losers are in the tobacco industry regarding this tax. At first look one would think a company like U.S. Smokeless Tobacco would oppose an added tobacco tax so why dont they? Because this tax only falls on the shoulders of their competitors.
UST continues to fund a multi-million dollar nationwide effort to get states to switch to a weight-based tax on smokeless tobacco products (by the can) from the current ad valorem (price-based) tax. This means that alternative products which are now cheaper than UST products will be forced to raise their prices. UST will have an opportunity to gain back their market share that has shrunk considerably over the last few years.
If Texas consumers deserve anything out of this legislative session especially during the tough economic times its more product options at lower prices not a tobacco tax that actually works to help Big Tobacco.
But tobacco interests aside lets look at the practicality of increasing the tobacco tax.
First Democrats like to argue for progressive taxes but an added tobacco tax does just the opposite. Since tobacco users come from lower income groups a tax increase disproportionately taxes the poor something no legislator should allow in todays economy .
Second this hurts small business. A large number of small businesses including gas stations and convenience stores rely heavily on the sale of tobacco products. Not only would demand go down as prices rise but the added revenue does not transfer to businesses. A larger tax then has a negative effect on small business.
Third there is no guarantee that an added tax will bring in greater revenue for the state. Much like lottery revenue which has dropped significantly and has not met revenue expectations a tobacco tax could see the same results. The state cannot get into the habit of relying on a tobacco tax to fix the true problem which is overspending by the state government.
Texas legislators should be cautious about supporting tobacco tax increases. Though often the easiest tax for voters to swallow its consequences are real and they are the last thing we need right now.
