Tax Analysts Blog

Using Local Cigarette Taxes for Schools Is Silly

Posted on Aug 20, 2014

Classic sound tax policy suggests that excise taxes should be limited to paying for externalities. It also suggests that local governments are incapable of imposing excise taxes. Yet William R. Hite Jr., Philadelphia's superintendent of schools, is pressing the Pennsylvania legislature to allow the city to impose a local option cigarette tax, the money from which will be dedicated to education.

That's a silly idea for several reasons. First, and most obviously, there's no policy justification for imposing cigarette taxes to pay for education. Cigarette taxes should be used to pay for the societal costs of smoking -- nothing more. That's a battle perhaps long lost, with many states using revenue from tobacco taxes to educate children. But that use remains inappropriate. When cigarette taxes are used for schools, they're not being used for smoking-related healthcare costs.

Moreover, education is a public good. It should be paid for with broad-based, generally applicable taxes. Schools should be important enough to be paid for with real taxes on income, sales, and property. Why foist the cost onto a minority -- and given the demographics of those who smoke, a poor minority?

If Hite's proposal takes effect, the Philadelphia school system is unlikely to see an explosion of new revenue. Although local governments try to tax cigarettes and even alcohol, there's no money in taxing vices. It's too easy to purchase cigarettes outside the city. And in big cities, excise taxes increase the likelihood of bootlegging and other criminal activities.

Ideally, schools should be paid for with property taxes at the local level, supplemented with income and sales tax revenue from the states. There is no place for cigarette taxes in the funding of education.

This is an excerpt of an article that first appeared in State Tax Notes

Read Comments (3)

Robert GoulderAug 20, 2014

Well said, David. But as wen know, politicians don't genuinely care about sound
tax policy. From their perspective the game all boils down to a simple
calculus: How to raise the most amount of revenue while incurring the least
amount of squawking from constituents. Revenue is revenue; they don't care
where it comes from.

Smokers are a convenient target for any new tax (regardless of linkage to
smoking-related externalities) as they lack an organized lobby to oppose such
efforts. The tobacco industry doesn't seem to care all that much about these
excise taxes since they don't pay them. Actually, I'm surprised the full cost
of state and local governments are entirely funded by taxes on smokers,
drinkers, and folks who play the lottery. Next up, excise taxes on people who
consume excessive amounts of sugary drinks and saturated fat.

Query: Are smoking cessation programs akin to strategic excise tax avoidance?

emsig beobachterAug 20, 2014

Good post. This may also be a ploy by the Pennsylvania legislature to increase
gasoline tax revenues from people smuggling cigarettes into Philadelphia via
their automobiles. I doubt that any legislator actually though of this, but
like Moliere's bourgeois gentilhome, who took credit for speaking prose, any
revenue bump will be welcomed.

edmund dantesAug 24, 2014

Mr. Brunori, you are unqualified to be a politician. You have way too much

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