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Report: Cigarette Taxes Will Fail To Solve Budget
Crisis; Tax Increase Will Destroy More Than 3,000 Pennsylvania Jobs
HARRISBURG, PA - As part of a package of tax increases that would likely
be the single largest net tax increase enacted under a solidly
Republican-controlled state government in Pennsylvania history, a new
report from The Commonwealth Foundation says the increase in cigarette
taxes will fail to solve the state's long-term fiscal crisis and will
destroy more than 3,000 Pennsylvania jobs.
"Increasing cigarette taxes by the proposed $0.69 per pack could result
in the loss of approximately 3,060 jobs in Pennsylvania," says report
author John Dunham, president of the economic consulting firm of John Dunham and Associates. "The proposed tax increase will likely eliminate
entry level jobs and put out of work the very same people the state just
helped leave the welfare rolls."
The report also notes that cigarette taxes are a "declining revenue
source," which means that Pennsylvania policymakers will be increasing
taxes again next year in order to match current government spending
levels. "Revenues from cigarette taxes historically decline after the
first year. That means the state will be dealing with a similar, if not
worse, budget deficit next year," said Dunham.
The Commonwealth Foundation says the state's current fiscal problem is
on the expenditure side of the equation, not the revenue side.
Pennsylvania government spending at all levels exceeds $70 billion per
year, or more than $5,700 for every man, woman and child in the
Commonwealth. The Foundation has been distributing "No New Taxes! Cut
Spending First!" stickers and placards to get their message out to
policymakers.
Commonwealth Foundation President Matthew Brouillette said, "Taxing
smokers is a smokescreen for 'taxers' who are unwilling to reduce
government spending that has outpaced the inflation rate by nearly two
and one-half times over the past seven budgets. We must break the
taxing and spending habits of the General Assembly and governor before
they bankrupt the taxpayers of this state."
The report also suggests that the use of tax policy to reduce underage
smoking is misguided. "Teenage smoking is a legal and social problem,
not a tax problem," says Brouillette. Research shows that increasing
taxes has far less of an impact on reducing underage smoking than does
education, family influence, and peer pressure. "Trying to curb teenage
tobacco use through tax policy is just poor public policy. Increased
taxes on tobacco will destroy jobs, hurt the poor, and fail to address
the root problem of Pennsylvania's fiscal crisis, while producing only
dubious success in reducing youth smoking incidence," he concluded.
EDITOR'S NOTE: The report, "Taxing Smokers: Will Cigarette Taxes Solve
Pennsylvania's Budget Crisis and Reduce Teen Smoking?," is available at
www.CommonwealthFoundation.org/taxes/pb02-06.pdf.
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The Commonwealth Foundation is a non-partisan, non-profit, public policy
research and educational institute based in Harrisburg, Pa. For more
information, please visit
www.CommonwealthFoundation.org or call
717.671.1901.
CONTACT: Matthew J. Brouillette, 717.671.1901
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