CITIZENS   FOR  LIMITED  TAXATION  &  GOVERNMENT

 

NEWS RELEASE

Tuesday, May 8, 2001

Addiction to new tax revenues hard to kick:
Birmingham, Montigny need a cessation program


For taxation addicts, over a billion dollars more this year in spending is not enough. A per capita tax burden that is 5th highest in the nation is not enough.

Senators Birmingham's and Montigny's tax hike on tobacco will not be enough either.

The Law of Diminishing Returns cannot be amended, repealed or ignored by our lawmakers.

This week's political scheme is to incrementally adopt Universal Health Care, initially on the backs of today's most vulnerable, politically incorrect pariah: the commonwealth's smokers.

But consider the tax-and-spenders' three alleged goals, which are incompatible and mutually exclusive: reduce smoking, provide more revenue, and increase spending for growth in an expensive entitlement program.

This latest proposed tax increase, which will make the Massachusetts cigarette tax the highest in the nation, will certainly depress the sale of cigarettes in the commonwealth -- some smokers will quit, others will charge across the borders or shop on the Internet.

If the alleged first goal is achieved and the sale of tobacco is reduced or eliminated, the corresponding cut in revenue will not sustain an entitlement program forever.

So when that Law of Diminishing Returns kicks in -- when the revenue stream from this oppressed target of opportunity inevitably dries up -- the tax-addicted pols will expect income taxpayers to replenish it.

We income taxpayers would like to see an inflation-adjusted increase in the personal exemption from the $8 billion tobacco settlement, which was pursued through the courts as a "reimbursement." Since we will never see that money reimbursed, use it for health-related expenditures and leave us taxpayers and the poor addicted smokers alone.


Testimony before the Legislature's
Joint Committee on Taxation
by
CLT Associate Director Chip Faulker
on Wednesday, May 9, 2001

POINTS TO PONDER
PROPOSED TOBACCO TAX INCREASE

1)  There is no longer any correlation between the tobacco taxes and smoking, except as a revenue stream from an easy target: politically incorrect smokers;

2)  Smokers already provide almost $300 million annually to Massachusetts from the current tobacco excise tax alone -- as well as the additional 5% sales tax on tobacco products, roughly another 15-20 cents per pack of cigarettes;

3)  The state reportedly pays only $200 million of that annually on "smoking-related illnesses" for uninsured smokers, netting $100 million a year from the tobacco excise tax for the state's general fund - plus what tobacco sales contribute to the state sales tax;

4)  The "tobacco settlement" of $8 billion-plus over 25 years contributes an additional annual $300 million to the state's coffers. The cost of the settlement was passed on to beleaguered smokers with a 50 cents per pack price increase, a hidden tax that must be added to the proposed "$1.28 per pack" -- bringing the total tax in Massachusetts to $1.78 per pack of cigarettes -- plus the additional sales tax of about 15-20 cents;

5)  Low/No-tax New Hampshire is only a few miles north. Smokers, further encouraged to cross the border for increasingly significant savings, while there will likely spend on other sales tax-free household items as well, depressing Massachusetts sales tax revenue;

6)  Once instituted, entitlement programs are forever. When tobacco tax and sales tax revenues inevitably decrease -- one of this bill's stated goals is to reduce consumption -- and prove to be insufficient, where will funds for "universal health care" come from next?


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