House sees no end to cigarette tax, even at their own peril

Taxpayer Association Tax Alert:

The House Revenue Committee is looking at blowing up another revenue source with HB 2122. In spite of Congress raising the cigarette tax by 61 cents last month, Oregon now wants to raise it by another 84 cents and hopes that the laws of over-taxation will not apply to Oregon. The Taxpayer Association submitted testimony that noted the most recent failure of a cigarette tax in New Jersey in 2007. In 2007, New Jersey raised their cigarette tax by 17.5 cents and the first year of the tax increase the revenue fell by$23 million instead of increasing! This horror story reminds us that the instability of the tobacco tax could completely undermine the health care budget in Oregon. Of 40 state excise tax increases only 8 met their projections (’03-’05).

Small grocery store lobbyist Rich Kosesan “It’s way too high. It’s a 50 percent increase. When you look at this along with the federal tax, government, in essence, is making twice as much a pack as the manufacturers.”

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Posted by at 07:40 | Posted in Measure 37 | 9 Comments |Email This Post Email This Post |Print This Post Print This Post
  • Rupert in Springfield

    >This horror story reminds us that the instability of the tobacco tax could completely undermine the health care budget in Oregon. Of 40 state excise tax increases only 8 met their projections (’03-’05).

    And yet why are there still fools out there who argue against the Laffer curve and think raising taxes always results in increased revenue?

    Remember when George Bush vetoed SCHIP for exactly this reason? He felt it was wrong to base expansion of a program on a tax source of steadily declining revenue. Well, now that SCHIP is with us, we shall certainly see. I wonder if the liberals who thought this was such a great idea will come out and for once admit they were wrong.

    “Gee, tobacco taxes aren’t covering it, we were totally completely wrong”

    I doubt it.

    “The liberal wants to be cared for as a child by his government yet have his thoughts taken as those of an adult.” – Rupert

    And yes, I did just make that up.

    • spam i am

      “Fools who argue againt the Laffer curve.”

      You are joking right? Nobel prize winning economists dismiss the Laffer curve as sophmoric. Even Laffer points out that reducing tax rates only increases revenues IF it ends up increasing GDP, and that only happens if the present tax rate is on the right hand side of the curve. Arguably, a 70% high end marginal tax rate is to the right of the curve, depending on the effective tax rate (rate minus legal deductions). I don’t know anyone who argues that a 35% top marginal rate is to the right of the curve.

      As for cigarettes…it seems like a win-win. If people end up smoking less, then society has better health. If they keep killing themselves, then they pay more into the kitty that helps with other people’s health.

      • Rupert in Springfield

        Id there any topic you ever comment on that you know a damn thing about?

        >You are joking right? Nobel prize winning economists dismiss the Laffer curve as sophmoric.

        I notice yet again you don’t cite a source. Looks like more of the usual, Dean the liar making stuff up.

        Please, before you comment on any more economic stuff, learn a little about the subject. At the very least, try and think through your argument a little before you blather. The article cites a study showing decreasing revenue from rising cigarette taxes, fits in real well with what the Laffer curve would predict.

        Doesn’t fit in so well with Dean the liar though.

        Oh well, blown out of the water again. Maybe you had better drop it like you did with LBJ and FDR. this one is a loser for you Dean.

        >As for cigarettes…it seems like a win-win. If people end up smoking less, then society has better health.

        Good God, are you seriously this brain dead?

        No one, I mean no one, in my experience devotes as little thought to their yammering as you do Dean. Seriously, did you think this through at all?

        Look, if you extend health benefits, say like we just did under SCHIP, by taxing cigarettes, what happens next?

        Well, in Dean world, where the Laffer curve does not exist, you could raise taxes to any level you want and get more and more money.

        In the real world though you will see declining revenues. Exactly like the study cited in the article shows.So, you are extending benefits with a declining revenue source.

        Win win? Only if you are someone who doesn’t exactly think through things before acting.

        You truly are a follower Dean, I mean if it rolls off Nancy Pelosi’s desk, you follow it unquestioningly.

        • spam i am

          Rupert…first, the Laffer curve was simply a modern incarnation of a centuries old theory. Somewhere between 0 and 100% is an optimal tax rate that results in high growth and high tax collections. The problem is no one knows where the optimal rate is, including Mr Laffer.

          From Greg Manikew, formerly head economic advisor to Bush 2:

          “Some supply-siders like to claim that the distortionary effect of taxes is so large that increasing tax rates reduces tax revenue. Like most economists, I don’t find that conclusion credible for most tax hikes…”

          “David Stockman the Director of the Office of Management and Budget 1981- 1985. in “The Triumph of Politics” writes:
          “[T]he whole California gang had taken [the Laffer curve] literally (and primitively). The way they talked, they seemed to expect that once the supply-side tax cut was in effect, additional revenue would start to fall, manna-like, from the heavens. Since January, I had been explaining that there is no literal Laffer curve.”

          For 2008 nobel prize winner Paul Krugman’s take on the great experiment at supply-side that was the Bush Administration, see:
          https://krugman.blogs.nytimes.com/2007/10/16/failing-to-pass-the-laffer-test/

          He relies on the data. Tax collections did not match the tax cuts.

          Alan Blinder, Chair of Princeton economics Department:
          “Supply-side economics, as that phrase came to have meaning in the early ’80s, is, I think, by now widely viewed as a bad joke. A bad joke because it actually got tried, and it backfired in a terrible way. It was never a serious intellectual doctrine, then or now.”

          Joseph Stiglits, 2001 Nobel winner:
          “There are two hypotheses (besides simple incompetence) about why Republicans paid so little attention to the growing budget shortfall. The first is that they simply trusted in supply-side economics—believing that, somehow, the economy would grow so much better with lower taxes that deficits would be ephemeral. That notion has been shown for the fantasy that it is.”

          Edmund Phelps, 2006 Nobel winner”
          “In my view, this core tenet of supply-side economics rests on a simple blunder. What matters for the amount of labor supplied is the after-tax wage rate relative to income from wealth. While after-tax wage rates soared for more than a century, wealth and the income it brought grew just as fast.

          To be sure, if tax rates were decreased permanently this year, there would initially be a strongly positive effect on labor supplied. But there would also be a positive effect on saving and thus on wealth next year and beyond. In the long run, wealth could tend to increase in the same proportion as after-tax wages. The effect on work would vanish.

          Case closed? Or will you again claim I did not provide any evidence?

  • Vernon

    Rupert,

    I do not forsee anyone in Salem saying the words “we were wrong”

    • Rupert in Springfield

      Nope, the best we will ever get is “well, we only did it with the best of intentions”

      A liberal never admits they were wrong on anything.

      Ever.

      Basically its an extension of the child like quality I was talking about before.

  • Sagano

    Or “let us lower a tax”

  • sybella

    I wonder what the people who are planning to pillage smokers will think when the government starts going after their unhealthy pop and fat fat latte’s? I say what’s good for the goos is good for the gander, they can’t be healthy. They cost the rest of us money. I think a 2500% tax should be just about right.

    • spam i am

      You are right Syb. We would be better off with a tax on all inherently unhealthy products both to discourage their excessive use and to raise funds to treat the problems created. But not having such a tax today is not a good argument for leaving the cigarette tax at its present rate.

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