Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, August 2, 1993 TAG: 9309090291
SECTION: EDITORIAL PAGE: A5 EDITION: METRO
SOURCE: GEORGE W. ABBOTT
DATELINE: LENGTH: Long
Various proposals are now being considered in Washington to substantially increase the federal cigarette tax. But whether we end up with a doubling of the current 24-cents-a-pack federal excise tax, or a $1 increase, or even the $2 ``monster'' tax, as the Washington Post labeled one proposal, the economic impact on our region would be devastating.
Tobacco is to the Southeast as logging is to the Northwest, as petroleum is to the Gulf states and Alaska, as wheat is to the Midwest. Here in the Southeast, tobacco provides about 200,000 jobs just in farming and manufacturing. Hundreds of thousands of other jobs are supplied in retailing, warehousing and many other direct and non-direct ways.
Based on a Price Waterhouse study, a $1-a-pack increase in the excise tax would remove from our region more than $485 million in annual tobacco-farm leaf sales. More than 25,675 farming jobs would be lost; 8,007 tobacco manufacturing jobs would vanish; 6,878 retail jobs would be eliminated; and some 1,884 wholesale trade jobs would be gone.
Thousands of businesses - from paper companies to computer manufacturers to advertisers - supply the tobacco industry. With a $1-a-pack excise tax increase, more than 14,500 jobs in the Southeast alone would evaporate from this tobacco-supplier sector of the U.S. economy. With this loss of workers and paychecks that buy food, clothing and everything else families require, a destructive ripple of tobacco unemployment would reach far and wide, adding another 89,250 Americans to unemployment in the Southeast.
The total economic damage in terms of unemployment with a $1-a-pack increase: 144,247 jobs and $3.4 billion in paychecks - gone.
At $2 a pack in tax increases, the pain in our part of the country would be unthinkable: More than 287,000 workers currently participating in the American economic system - earning paychecks totaling more than $6.8 billion and paying taxes - would be told to start collecting unemployment checks from the government while they look for work elsewhere. Taken from our Southeastern economy would be $972 million from tobacco leaf sales.
Even a ``simple'' doubling of the federal cigarette tax - to 48 cents a pack - would be a severe blow to our region. More than 42,400 workers would face unemployment and more than $1 billion would be lost in paychecks.
But that's not all. Cigarette taxes traditionally have been a source for generating revenue at the state level. A large increase in the federal cigarette tax will reduce sales of tobacco products. That will reduce state cigarette-tax revenue. While tobacco excise taxes are low in the Southeast - reflecting tobacco's contribution to the region's economy in many other ways - a $1-a-pack federal tax increase will cost Southeastern states $155 million. Will other taxes be raised to make up the difference? What will be cut? Education? Support for the elderly?
A federal cigarette tax increase is a bad idea for other reasons as well.
Cigarette taxes unfairly hit those least able to pay: low- and middle-income taxpayers. No matter how high or low a person's income, he or she pays the same amount of cigarette taxes - and that's not fair economically.
The government will not get the money it expects by raising taxes. In 1990 and 1991, Canadian cigarette tax rates rose 45 percent. But revenue increased only 1.4 percent. Canadians are crossing the border to buy their brands in U.S. stores. Smuggling and black markets are thriving.
Smokers already pay their fair share. According to an article in The Journal of the American Medical Association (March 17, 1989), `` ... On balance, smokers probably pay their way with the current level of excise taxes on cigarettes.'' And that statement was made before the last two federal excise tax increases and the scores of state tax increases enacted since 1989.
If America's health-care system is broken, the government should fix it - not just throw more money at the problem. At both the state and federal levels, cigarette taxes are being proposed to finance health-care reform. Americans spent $838 billion on health care in 1992. But, according to Consumer Reports, at least $200 billion was thrown away on ``overpriced, useless ... treatments, and on a bloated bureaucracy.''
A major tax increase will not deter youth from smoking. Where this has been tried, the tax didn't do what its supporters said it was supposed to do. Last year, health authorities got together to review the results of a major tax increase enacted in California three years earlier. To the dismay of conference participants, a spokesman for the California program reported that the tax appeared ``to have had little effect'' on adolescents, and that their rate of smoking was virtually unchanged.
Given all the reasons a major tobacco excise tax increase is a bad idea, a surprisingly large percentage of Americans seem to favor such a tax. Or is it so surprising? Three-fourths of American adults do not smoke - and proponents of the tax have been doing nothing to discourage the public from assuming that, if they don't smoke, there will be no economic price to pay for this tax.
Workers and employers all over the country will be paying the price, but it will hurt far more in the Southeast. Not since Reconstruction has the Southeast faced such a critical economic issue.
\ George W. Abbott is a tobacco warehouseman, farm supply dealer and farmer living in Darlington, S.C.
by CNB