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Bentley’s $200 million ‘sin tax’ hike is a terrible idea, here’s why (opinion)

Cigarette

On Friday, Alabama Gov. Robert Bentley laid out a plan to raise taxes in Alabama by $541 million, including a $205 million tax on tobacco products. This “sin tax” will increase taxes on cigarettes by 82.5 cents per pack, bringing the total tax on cigarettes to $1.25 per pack.

“Sin taxes,” which are taxes levied on items considered undesirable or harmful, are a favorite tool of liberal politicians looking for a palatable way to prop up big government. They get the revenue they want while avoiding a tax hike on income, property or other areas that could elicit an immediate negative response from the majority of the voting public. So it’s no surprise that the tobacco tax was the biggest piece of Bentley’s strategy to extract more money from the pockets of Alabama taxpayers.


A quick side note on one of the main reasons Alabama’s General Fund Budget has gotten to the point that we’re talking about tax hikes…

In 2003, Medicaid consumed 18 percent Alabama’s General Fund. By 2014 that number had skyrocketed to an incredible 35 percent. The legislature had to appropriate an additional $70 million to the program last year to help fund it, yet Democrats continue calling for the governor to expand the program even further under ObamaCare. And — perhaps unsurprisingly at this point — it sounds like he’s actually considering it.

…But back to the main point…


Let’s take a quick look at the history of cigarette taxes in Alabama and around the nation.

Cigarette Taxes 1960 to 2012

As the GIF map above shows, every U.S. state taxed cigarettes at under 10 cents per pack in 1960. By 2012, only a handful of states were taxing cigarettes at under 50 cents per pack.

That’s a significant rise, no doubt, but proponents of tobacco tax hikes note that the overall rise in taxes on cigarettes has not kept up with the rate of inflation.

In 1960, Alabama taxed cigarettes at 6 cents per pack. By 2004 the rate had risen to 43 cents per pack, where it remains today. If the tax had kept pace with the rate of inflation, it would be 48 cents per pack.

But none of that takes away from the fact that the government is taxing a particular product at a higher rate than others simply because it feels like it. So it is hard to ignore the hypocrisy of Gov. Bentley saying on Friday that he believes “taxes should be fair among all people” while at the same time announcing punitive taxes on a product he doesn’t like.

And outside of the obvious fairness issue, those who think a hike on cigarette taxes could be a longterm cure for Alabama’s budget woes should also consider the precipitous decline in cigarette sales over the years.

As a result of the tax hikes, laws banning smoking, aggressive anti-smoking ad campaigns and polling that indicates Americans no longer consider smoking “normal behavior,” the U.S. Surgeon General published a 980-page report last year actually predicting an eventual end to smoking in the United States.

The GIF map below illustrates that smoking in Alabama hit its peak in 1979, when there were 123 packs of cigarettes sold for every person living in the state. By 2012, Alabama’s yearly cigarette sales per capita had plummeted to 67.

Cigarette sales per capita

The continued decline of the tobacco industry flies in the face of Gov. Bentley’s claim that he is pushing for a longterm solution to the state’s budget woes.

The bottom line is that sin taxes are nothing more than a way for liberal politicians to prop up big government rather than implement real reforms. For that reason alone, Alabama’s conservative legislature should reject Gov. Bentley’s massive tax hike. The voters will reward them for keeping their promises, especially since they can’t punish Bentley for breaking his.


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