While jacking up tobacco taxes to fund a health care program might sound like a good idea to some, there are many costs involved. For example, increased government involvement in health care inevitably leads to higher health care costs.
Plus, there are economic costs to increasing taxes.
Some of those costs were laid in an article by Scott Ramminger, president of the American Wholesale Marketers Association, in the January 19 Buffalo News.
Ramminger noted:
If Congress approves a bill to expand the State Children’s Health Insurance Program (SCHIP) by significantly increasing federal cigarette and tobacco taxes, the result will be major sales reductions, massive layoffs, numerous store closings and many more robberies because of the much higher value of tobacco products…
The economic impact on the entire tobacco industry will be disastrous.
First, a 156 percent tax rate increase on cigarettes compounded by tax rate increases of up to 6,000 percent on large cigars, 2,197 percent on little cigars, 710 percent on roll-your-own tobacco, 156 percent on smokeless tobacco and 156 percent on pipe tobacco will lead to declines of 10 percent or more in retail sales of tobacco. This large reduction in sales will have a corresponding impact on industry jobs.
According to 2002 U. S. Census Bureau statistics, 1.17 million union and non-union employees are employed by tobacco manufacturers, wholesalers and retailers. With upward of a 10 percent decline in tobacco sales, industry estimates project up to 117,000 jobs will be lost.
Remminger goes on to note other costs, such as increased criminal activity and hitting the pocketbooks of low and middle-incoem earners.
Can the Senate and President Obama really ignore these higher costs and lost jobs?
Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council
No comments:
Post a Comment