Snuffing out a smart tax

As the legislature struggles to find enough revenue for the state’s overdue budget, a tax on cigars and smokeless tobacco should be a no-brainer. But this is Harrisburg, where common sense usually faces an uphill battle.

Pennsylvania is the only state in the nation that doesn’t impose an excise tax on smokeless tobacco. It is one of only two states – the other is Florida – that doesn’t tax cigars.

Gov. Rendell has proposed taxing the products to bring in $38 million per year. A proposal by Rep. Dan Frankel (D., Allegheny), who is on the House Appropriations Committee, would use the same tax rate as cigarettes, raising $70 million annually.

But Senate Republicans yanked the stogies out of their mouths long enough to voice their opposition to this tax. They said essentially it’s too small a number with which to concern themselves. Democratic leaders have resisted the tax, too.

Meanwhile, legislators are picking up sofa cushions in search of loose change to fill the state’s budget gap. For example, they found $25 million for general operations hiding in the state liquor-store system. That’s how small a number legislators are scrounging for. Yet, they forgo the tobacco tax.

The need for that levy is greater because the legislature is intent on making dumb moves such as granting certain large corporations in Pennsylvania a tax break. A proposed change in the “single sales” tax policy would drain $165 million from state coffers over two years. It should be ditched in favor of a more comprehensive overhaul of corporate taxes.

One stumbling block to reaching a final budget deal with Rendell is that the governor claims the legislature’s revenue projections don’t add up. As the week began, the two sides were about $400 million apart in their revenue estimates. A tobacco tax that adds $38 million, or $70 million, to the pot would certainly help.

Even better, the proposed tax on smokeless tobacco and cigars is what’s known to policy geeks as “recurring revenue.” That means it raises a predictable amount of revenue from year to year.

The tentative budget deal relies on many one-shot revenue sources, such as emptying the state’s Rainy Day fund of its entire $750 million. That’s an easy call for legislators this year, but it leaves the cupboard bare for next year, which increases the likelihood of having to raise another tax.

Aside from the math, there is an important policy statement to make with this tax: Snuff and cigars are bad for your health. The Campaign for Tobacco-Free Kids said 16- to 25-year-olds in Pennsylvania use smokeless tobacco at twice the national average. Some smokeless tobacco brands are flavored to appeal more to youths. Raising the tax on kiss cigarettes, but failing to tax cigars and snuff, could encourage more young people to use these products.

Pennsylvania’s tobacco industry, based in Lancaster County, is not large. Imposing this sensible tax would hit a relatively small number of consumers, and would raise needed revenue in a budget year filled with unkind cuts.

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