Friday, February 22, 2008

The Cigarette Tax

Yesterday, the House voted 74-42 to raise the state's cigarette tax by $1 to $1.18.

I voted for it. I was one of five Republicans who did.

I'm sure I'm not telling you anything you don't already know. There's a Medicaid shortfall. We know this, and $169 million is the House's magic number to avoid cutting services. There are two options being touted (though there are probably many more that haven't been thought of yet). One is to raise the cigarette tax. One is to institute a gross revenue assessment on Mississippi's hospitals.

Both sides have valid points. The cigarette tax is too low. A large portion of our Medicaid costs come from tobacco-related illnesses. For me, it's a matter of personal responsibility. If a person is doing damage to themselves by smoking, and the taxpayers of this state will one day have to pick up the tab for taking care of them, there's no reason why they can't place a small down payment on this health care every time they buy a pack of cigarettes.

The Governor also has a point. Back in the mid-90s, the Mississippi Hospital Association did advocate taking a part of the public hospitals' revenue for a Medicaid match. They upped their giving earlier this decade. Now, the plan is to spread that contribution out over ALL of the hospitals, public and private. The private hospitals have a problem with it, and it's easy to understand why. The small, rural hospitals have a problem with it, and it's easy to understand why.

When I ran for this office, I never campaigned on a particular "tax swap". I advocated raising the cigarette tax by $1. I signed a pledge during the early months of my campaign. It was risky, but for me, it was the common sense thing to do. I would love for the people of this state to get some tax relief, whether it be groceries, a break on their car tags, giving more room on the homestead exemption for seniors, or an earned income tax credit for our working poor. It would be great, but it won't happen this session. I also said, during the last week of the campaign (and I was quoted in the HA), as saying that Medicaid appeared to have a shortfall, and might have to raise the cigarette tax just to cover it. On a rare occasion, this prediction proved correct.

Will a $1 cigarette tax increase help pay for Medicaid? Yes. Do I believe it's really going to raise $174 million and be a sustainable funding source for Medicaid? Not a chance. We can look at Tennessee and see that the hope of $174 million annually just won't work. I also believe some people will actually cut down on their smoking due to this increase, and that means cigarette tax revenue will be a declining revenue stream. So even if it does hit $174 million, it won't keep us afloat forever.

It's also safe to say the bill is dead as soon as it gets to the Senate. However, I believe by the House voting on it, it draws each Chambers' line in the sand and gets the parties working towards a compromise.

To cover the rest of Medicaid, I do believe we'll have to institute some sort of gross revenue assessment. But I don't believe in taxing the hospitals as much as the Governor is proposing. I would be okay with a much smaller assessment, balanced among private and public hospitals; and an assessment that would exempt small, rural hospitals. I sympathize greatly with people like Rep. Becky Currie, whose small hospitals, which are the main economic development engines in these rural areas, would be harmed by having to carry the burden of an assessment.

In the end, I believe this balanced compromise will happen. The cigarette tax will get us 60-85% of the way there, depending on how much the final increase is (and I do believe there will be an increase), and a small assessment will do the rest. But that's just my take on it.

3 comments:

Christian said...

"If a person is doing damage to themselves by smoking, and the taxpayers of this state will one day have to pick up the tab for taking care of them, there's no reason why they can't place a small down payment on this health care every time they buy a pack of cigarettes."

Excellent point. I agree with your logic 100%. You mention that the Senate will likely kill the increase. Any ideas of why, other than simple tradition of tobacco being a southern cash crop?

Raland said...

I just wanted to ask you what is the tax on cigarettes on neigboring states and what will keep people from say Greenville to drive a short distance to Lake Village to save some considerable money?

John Leek said...

Mississippi has the 3rd lowest tax on cigarettes and other states are still increasing theirs. The cost of gas and the inconvenience would probably make that number small.