Legislators should cut spending instead of increasing tobacco taxes

by Frances Nuar and Michael LaFaive

Hawaii is facing a $1.3 billion state budget deficit — and in response, a series of bills have been introduced to hike taxes, including Other Tobacco Product taxes. Among the proposed legislation is House Bill 273, which would hike taxes on such products as cigars and smokeless tobacco. The state should avoid all tax increases and instead turn to spending cuts to balance its budget.

Tobacco taxes are often sold to the public as a way to improve public health by raising the cost of tobacco products. But proponents never advertise the hidden costs of such policies, which can include rampant smuggling as well as violence against people, property and police. Moreover, taxes on smokeless tobacco may harm health directly because research shows that these products are a safer alternative to smoking. Lastly, there is a direct cost to individual liberty when lawmakers single out a particular group for harsh tax treatment.

The motivation behind these new taxes appears to be revenue as the new monies may not be used for tobacco cessation programs. In fact, while a percentage of the proposed tax is directed toward the trauma system special fund, it is one of numerous special funds marked to be raided by Senate Bill 120 to pad the general fund.

The tax hike has support from special interest groups who believe the increase will result in less tobacco consumption. That may be the result, but probably not to the degree that is hoped.

First, studies show that up to 85 percent of changes in after-tax sales of cigarettes are the result of tax avoidance behavior and not of quitting. Second, part of that tax avoidance involves substituting cheaper “roll-your-own” smokes that can be rolled without filters, which increase ingestion of tar and nicotine by the smoker. Lastly, studies show smokeless tobacco is a legitimate harm reduction strategy, so hiking taxes on smokeless products may do more health harm than good.

A 2002 study in the British Royal College of Physicians reported that “smokeless tobacco products are 10 to 1,000 times less hazardous than smoking, depending on the product.”

Brad Rodu, endowed chair in tobacco harm reduction research at the University of Louisville, is an expert on smokeless tobacco and its impact on cancer and mortality rates. He has reported that there is a link between smokeless tobacco use in Sweden and decreases in rates of lung cancer. In his co-authored 2002 article in the Journal of Internal Medicine, Rodu reported that smokeless tobacco products were primarily responsible for a decline in smoking among Swedish men from 23 percent in 1986 to 14 percent in 1999.

That Hawaii is an island state will not leave it immune from such illicit trafficking. A 2007 report from England indicated that 50 percent of all hand-rolled tobacco smoked in that country was smuggled in. Much of this consumption is of tobacco that is produced in illegal and unregulated markets, perhaps increasing the likelihood that the products themselves will be more dangerous than the legitimate brands being avoided due to high taxes.

Legislators should cut unnecessary spending in order to balance the budget, rather than seeking tax hikes that will further burden business and taxpayers and do little to reduce tobacco consumption.
This article was first published in the Honolulu Star-Advertiser.

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