Trend in tobacco tax revenue presents a challenge for states

The Oklahoman Editorial Published: October 19, 2012

AS smoking has declined in the United States, Russia has become a prime market for tobacco sellers. Nearly 60 percent of that country's population smokes, and smokes heavily.

Now Russian officials appear likely to impose restrictions on tobacco advertising and smoking in restaurants. A separate effort to raise excise duties by nearly 135 percent is also under way.

These moves will be praised by health advocates, of course, but the ultimate impact may be relatively limited. According to The Wall Street Journal, analysts say similar initiatives in other countries have driven down the number of smokers by just 3 percent to 5 percent during the first year of implementation and then leveled off.

That would leave Russia with nearly as many smokers, but also more revenue from excise duties. As government finds ways to use the additional revenue, the unintended consequence is to make it harder to eliminate tobacco use. Ironically, government dependence on tobacco tax is a major obstacle to banning tobacco. Just look at the United States and Oklahoma for evidence.

In Oklahoma and other states, policymakers often cite the impact of smoking-related illness when justifying higher tobacco taxes to fund health initiatives and welfare programs. However, once such “sin” taxes are adopted, a significant share of the population suddenly depends upon smokers to subsidize government even as the number of smokers gradually declines. It's a Catch-22 that few policymakers are willing to acknowledge.

One exception was former state Rep. Ray Vaughn, R-Edmond. In 2000, Vaughn filed legislation to outlaw the sale of tobacco in Oklahoma by 2025. The quarter-century phaseout, he said, would allow for a smooth transition for businesses that relied on tobacco sales while ultimately resulting in a healthier population. Naturally, Vaughn's bill went nowhere. The impact on government funding was likely a factor.

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