Burnt Orange Report

Sin Taxes & What You Could Buy With Your "Tax Relief"

By Vince Leibowitz

An increased cigarette tax, one of the "ultimate sin taxes," Texas could impose to raise revenue for public school education, was the hot topic at the House Ways and Means Committee meeting Thursday.

The proposed $1.00 per pack increase could bring in as much as $800 million in additional revenue per year.

Naturally, folks on both sides of the issue liked up to testify:

Opponents, such as tobacco giants R.J. Reynolds and Philip Morris, have hired lobbyists to make their cases. They argue that the higher tax would fuel an already lucrative smuggling market, increase Internet sales and would drive Texas smokers to neighboring states and Mexico to buy cheaper cigarettes.

With a $1 per pack increase, the price of a carton of cigarettes would be $35 cheaper in Mexico than in Texas, according to Philip Morris.

"This incentive for smokers to buy their cigarettes from neighboring states and Mexico could lead to a negative impact on excise tax-sensitive businesses," said Jamie Drogin, a Philip Morris spokeswoman.

But advocates of the measure, such as the coalition Texans Investing in Healthy Families, say the tax would persuade smokers in Texas to quit and discourage teenagers from ever lighting up. The group is made up of the Texas PTA — a child advocacy organization of parents and teachers — the American Heart Association and the American Cancer Society, among other groups.

They also argue that fewer smoking Texans would translate into a decrease in health-care costs for the state. In the first five years of an increased tax, the state would see $90 million in health-care cost savings, McGoldrick said.

The current cigarette tax is 41 cents, and a $1-per-pack increase would make cigarettes more expensive in Texas than in any other border state.

Cigarette makers argued that a tobacco tax is not a stable revenue source because it will decline as the number of smokers dwindles. But proponents say the anticipated revenue decrease has been factored in to their revenue projections.

A tentative plan filed last month to pay for an overhaul of the public school finance system includes the $1 per pack increase in cigarette taxes. But the author of the plan, Rep. Jim Keffer, R-Eastland, cautioned that the bill probably would change significantly before it gets a vote.

A cigarette tax also was included as an option in the Senate school funding plan, but specifics were not addressed.

Far be it for me to agree with the filthy cigarette lobby, but it seems they may be right: it's not a stable revenue source.

Not only would the revenue from the tax go down as more Texans stop smoking, but revenue would also decrease in tough economic times when Texans have less disposable income to spend on the nicotine delivery devices of choice.

And, on the subject of taxation, the El Paso Times had an interesting article which noted:

Plenty of ideas are floating around the Capitol, but little consensus has formed other than broad agreement that school property taxes must be reduced by about one-third. The average El Pasoan with an $83,000 house would save $340 a year in lower school property taxes.

My question is, how do you consider $340 a year tax relief?

Sure, in every single poll that comes along, everyone says they want "tax relief." But, let's be realistic (and I think may be making an argument of Ben Barnes' here, but couldn't find reference to where I thought it was online, so bear with my version of it): if Texans knew how little tax relief they'd actually recieve, and what good that money could do, wouldn't they just say "to hell with that?"

Let's see. $340 dollars of tax relief. What can you do with that, especially when it's not really a savings you "see" in your pocket like your IRS refund? You could:

•Pay part of your car/house payment, or all of it if you have cheap car payments, for one month.
•Buy roughly 194 gallons of unleaded gas at $1.75 a gallon. Let's say your car tank holds 12 gallons of gas, and that translates to about 16 tanks of gas--per year.
•Pay about half of the cost of one semster hour ($743)at the University of Texas at Austin--if your child only takes 1-3 semsters of coursework. (Byron & Karl, correct me if I'm wrong on this one)
•Add about $6.50 to your grocery budget, per week, for 52 weeks. Just about enough to buy both a gallon of milk and a bottle of soda.
•Pay your utility bills for 1 and a half months--if your utility bills are only $220 per month.
•Buy about seven tires, if tires for your car cost $49 dollars.
•Pay for you to buy one daily newspaper per day, for 365 days, if that newspaper costs only $.50, and leave you with $157.50 to spend on magazines. So, if you buy a paper a day and the average magazine costs about $3.50, you could buy about 45 magazines--less than one per week for 52 weeks.

Of course, those are just some numbers I crunched on my handy calculator, so they aren't nearly as sophisticated as anything anti-tax advocates would use. I just thought it would be interesting to illustrate exactly what $340 could buy, since the figure was thrown out there.