Idaho Tax Committee Chairman Pushes Cigarette Tax Hike; Others Push Back

Idaho Tax Committee Chairman Pushes Cigarette Tax Hike; Others Push Back
January 23, 2012

In a recent statement to the Idaho Reporter, State Rep. Dennis Lake (R-Blackfoot) labeled himself a legislative “errand boy” for the American Cancer Society, pledging to work for higher cigarette taxes at the group’s behest.

Lake offered legislation for a higher cigarette tax last year but failed to win support from the Revenue and Taxation Committee, which he chairs. He says he plans to try again.

The proposal, touted as a “win, win, win solution” by the ACS coalition in terms of public health, revenue, and politics, would increase the Idaho cigarette tax by $1.25 per pack.

“The ACS and its supporters have an agenda. They’re trying to convince an otherwise anti-tax legislature to raise taxes,” said Wayne Hoffman, executive director of the Idaho Freedom Foundation.

Dubious Results

An increase in Idaho’s cigarette tax is not an effective way to curb youth smoking, and it is unlikely to garner the projected $50 million in revenue, Hoffman says.

The proposed Idaho bill “will do little, if anything, to curtail smoking,” while “hurting the jobs and people that benefit from the sale of a legal commodity,” said Hoffman.

“As we’ve seen in other states, tobacco taxes are not the revenue gold mine advocates claim them to be,” said John Nothdurft, director of government relations at The Heartland Institute. “Following a 2007 cigarette tax increase, New Jersey lost nearly $24 million in revenue as residents looked across state lines, online, and even to black markets for their cigarette purchases. In Idaho, tribal lands offer yet another loophole.”

More Tax Increases

Discrepancies between projected and actual revenue from cigarette tax increases often encourage government overspending as states receive less money than projected. According to the National Taxpayers Union, 41 of 59 state tobacco tax increases from 2001 to 2006 were followed within two years by tax hikes on the general public.

Cigarette taxes and other excise taxes attempt to tap resources from a base that is, by nature of the tax itself, both narrow and shrinking, as higher taxes discourage use of the taxed products or cause movement to black markets to avoid the higher taxes.

The taxes can also harm a state’s economic competitiveness. Idaho’s current tax rate of 57 cents per pack is eighth-lowest in the nation, and the suggested increase would render it fifteenth-highest.

Excise taxes rarely deter existing smokers, something one outspoken opponent of Lake’s proposal—Idaho State Rep. Lenore Hardy Barrett (R-Challis)—said he knows firsthand.

“Having been a smoker, I know people will pay the price. You just won’t buy a quart of milk or something else to pay for it,” he said.

Elizabeth Henderson (elizabethhenderson2012@u.northwestern.edu) writes from Chicago.