Let’s raise Louisiana’s cigarette tax

By Robert Mann

There is no single fix for the $1.6 billion budget shortfall Gov. Bobby Jindal and state lawmakers face in the coming legislative session. They will have a virtual Chinese menu of revenue raising and budget cutting options from which to choose. It’s a long list that includes various tax and fee hikes, eliminating or reducing corporate tax credits, trimming the size of state contracts, creating tax credits for those who contribute directly to state colleges and increasing college tuition.

None of these ideas, alone, will prevent the looming catastrophe. But lawmakers must come up with something. They face some painful choices. If they don’t find a way to close the budget shortfall, universities will be gutted. Health care will sustain $800 million in cuts, which includes forfeited federal funds because of the missing state match. Other essential government services will vanish.

The situation is so critical that legislators may have to choose between risking re-election and allowing the state’s vital institutions to collapse on their watch. Raising taxes is never a pleasant task, much less a few months before they face the voters, but they must do it.

Here’s where they should look first: Raise the state’s cigarette tax.

At only 36 cents per pack, Louisiana has the nation’s third-lowest cigarette tax. New York has the highest, at $4.35. When local taxes are added, Chicago is the most expensive place to buy cigarettes. It will cost you $6.16 per pack there. In New York City, $5.85. Neighboring Texas imposes a $1.41 tax. In Mississippi, it’s 68 cents.

The benefits of raising cigarette taxes are considerable. It would not only generate significant new revenue; higher prices would also persuade many people to quit smoking or significantly curtail their deadly habit. It would help make Louisiana a healthier place and reduce the burden of smoking-related diseases on our public health system.

Continue reading on NOLA.com at this link.

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5 Responses to Let’s raise Louisiana’s cigarette tax

  1. Pingback: » Let’s raise Louisiana’s cigarette tax Forward Now!

  2. Stephen Winham says:

    IT would help if over 1,000 politicians, including our governor, hadn’t signed that ridiculous Grover Norquist pledge they seem now hide behind as if violating it would lead them directly to Hades.

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    • jerelgiarrussowp says:

      Talk about someone who does not love the U.S.-check Grover Norquist’s background. He does but hide his marriage to a Muslim woman possibly with extremist ties, two adopted Muslim children and founder of the Islamic free Market Institute. His absurd stance on no taxes ever and government so small it can be drowned in a bathtub smack of….destruction from within.

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  3. Gregory Foreman says:

    Raising cigarette taxes is excellent idea-provided revenue from such any increase were dedicated reserved for a specific purpose, i.e., health care, smoking cessation programs. However, raising cigarette taxes would result in an unanticipated drawback. Why? The 1998 Cigarette Settlement prescribes a given state’s portion of the yearly settlement payout to be based on the percentage of smokers in the respective state. Essentially, this formulation results in the states that are most effective in reducing smoking realizing lower settlement payments. (Tell me the cigarette lawyers didn’t play the attorney generals like a fiddle.) For example, in 1998, Louisiana’s anticipated settlement was estimated at $4.60 billion dollars over the next 25 years or an average of $184 million dollars yearly. Because of the decrease in smokers, in 2011, Louisiana received only $138.50 million of which $83.10 million(60%) was required to help pay 20 and 40 year bonds collateralized against the future settlement payments. So, raising cigarette taxes may indeed be the health conscious thing to do, however, it could easily result in unwanted fiscal consequences.

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  4. Greg Foreman says:

    Raising cigarette taxes at first glance appears a “no brainer”, provided any tax increases were dedicated to a specific cause or purpose such as health, welfare or smoking abatement. However, a “tangential” aspect of increasing cigarette taxes should be examined and appreciated prior to any cigarette tax increase. First, your observation that raising the tax would be good for Louisiana because an increase would (a) increase state revenue from cigarette sales and (b) would decrease the population of smokers improving health and by extension reduce health payments.
    However, the 1998 Cigarette settlement based each state’s payment on the population of smokers in a respective state, ie, the fewer the number of smokers in a state, the smaller the settlement payment. When the settlement was originally signed in 1998, Louisiana anticipated yearly payments of from $160-180 million dollars. Decreased smoking in Louisiana has reduced the payment to $140 million. That was bad enough.
    However, aggravating this situation is the state in 2001 “sold” bonds collateralizing-the future settlement payments-I call this the J.G. Wentworth Effect, the state wanted their money now. From that point on, 60% of settlement payments went not to the state but to the bondholders. As a result in 2014, Louisiana received a settlement payment of $140 million dollars, $84 million of which went to the bondholders. The balance of the 2014 payment, $56 million, was distributed between the Millennium Fund, and the Louisiana Fund. Essentially, the bondholder’s payments are fixed, the 1998 Cigarette settlement payments are not. So, if an increase in cigarette taxes will produce a decrease in those smoking cigarettes, then we should be prepared for a decrease in the settlement payments from the 1998 agreement.
    An increase in cigarette taxes is “OK” by me and I’m a smoker. However, any tax increase should be dedicated toward early retirement of the 2001 bonds collateralized against future settlement payments and not the state’s general fund. At some point in time, theoretically, the 1998 settlement payments will not be sufficient to cover the principal and interest requirements of those bonds. Such is the reality in many states that applied the “J.G. WENTWORTH” approach. (REF: HOW WALL STREET TABACCO DEALS LEFT STATES WITH BILLIONS IN TOXIC DEBT, CEZARY PODKUL, AUG 7, 2014, PROPUBLICA)

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