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The Vicious Tobacco Cycle

Posted by CorpWatch on January 3rd, 2006

Oklahoma has a problem. Too many people are quitting smoking. It's cutting into the state's budget.

Tobacco tax revenues are up, but not as high as expected, and that means that health programs funded by tobacco revenue are gasping for air. This illustrates an interesting conundrum: how can state governments effectively fight tobacco use when they have arranged to be so dependent on the tax revenue smokers provide? Sin taxes like those levied on tobacco are supposed to dissuade people from using the product - but if too many are scared off, budget line items go up in a puff of smoke.

George Will recently made this same observation (although he demonizes state governments for their 1998 deal with the tobacco companies to seize proceeds from a legal and federally subsidized commodity), but with a decidedly different conclusion. He says the Master Settlement Agreement should be scrapped. But consider: if fewer people smoke, fewer people get sick, meaning fewer costs associated with both healthcare and lost productivity. In the long run, if the theory holds, income may dwindle at roughly the same pace that outlay does.

Quitting smoking takes time, patience and determination. Apparently, so does quitting tobacco taxes.