Mississippi: More Tobacco Tax Talk


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The main tax topic on last year's agenda for Mississippi lawmakers was the cigarette tax. And just as in early 2006, legislative leaders are now talking about hiking the state's relatively-low cig tax (currently 18 cents per pack) and using some of the money to cut the sales tax on groceries. As we noted earlier this year, this idea has some flaws, not least of which is that it would use a no-growth revenue source to pay for a growing tax cut.

Of course, Gov. Haley Barbour doesn't even need to work this hard to find a reason to oppose such a move: he's against tax hikes, and a cigarette tax increase is definitely a tax hike.

Mississippi editorial boards are not without entertaining opinions on this one. The Hattiesburg American argues that if Barbour were really a no-new-taxer, he would support the cigarette tax hike. Here's the logic:
If he were really against "raising anybody's taxes," he would support a tobacco tax increase that would reduce smoking and thereby reduce the growth in taxes necessary to support public health care needs.
It's an interesting argument, and one that shows a good understanding of what the cig tax ought to be used for, but doesn't really give Barbour an exemption from his no-taxes pledge, for a couple of reasons. First, it doesn't work unless Mississippians respond to the tax hike by quitting smoking. For every Mississippi resident who ponies up the extra tax and keeps on puffing, the state will enjoy (horror of horrors!) a little extra tax revenue, and the extra health care costs associated with smokers will still be a burden on the state. And second, any reductions in health care costs due to smoking cessation are gonna take a few years to emerge. The idea that the state's health care costs will go down in fiscal year 2007 (or even fiscal year 2008 or 2009) due to a tax hike enacted in '07 is fanciful at best.

Having said that, the folks at the American are thinking about the uses of a cigarette tax hike in exactly the right way. If a cig tax is working right, it's discouraging a socially bad (and socially costly) behavior, and is saving the state money. That (rather than finding revenue to cut other taxes) is the right reason to advocate a cigarette tax hike.

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