Cigarette tax? Welcome to Groundhog Day in the General Assembly
By Bill Settlemyer
President and CEO, Setcom Media
Remember the film “Groundhog Day” starring Bill Murray? He played a cynical TV newscaster assigned to the dreary task of covering Groundhog Day festivities in Punxsutawney, Pa.
The next morning, he wakes up and finds he’s stuck reliving Groundhog Day over and over and over again. He finally discovers that he can awake from this karmic nightmare by becoming a person who cares for others instead of wallowing in narcissistic self-absorption.
And now it’s Groundhog Day in South Carolina’s General Assembly, only instead of looking for a furry little animal, legislators are searching for the right thing to do on cigarette taxes.
I’m almost too weary to write (again) on this topic. About this time last year hope was rising that a bill introduced in the House (H. 4850) would raise the cigarette tax to 32 cents and use the resulting revenue to reduce small business insurance costs by helping to pay premiums for low-income workers and their families. If you want to read that column, here’s the link on our Web site: www.charlestonbusiness.com/pub/12_8/editorial.
If passed, the bill would have resulted in a win-win outcome for the state’s small businesses and the public.
It would have helped low-income families and their children. It would have reduced the ranks of the uninsured in our state.
It would have helped hospitals and physicians burdened with providing unreimbursed medical care.
It would have helped both employers and employees in all size companies by reducing the “hidden tax” in their group insurance premiums added to recoup the cost to providers of delivering unfunded care.
Sounds really smart, right? So did the General Assembly go for it? I’ll bet you can guess the answer (no).
So here we go again, a year later. Groundhog Day, round two. The governor and a fair-sized contingent of legislators are hewing to the notion that government has no role to play in meeting these critical needs. Instead, they want any cigarette tax increase to be “revenue-neutral.”
In other words, the revenue raised by the cigarette tax would all be used to offset some other existing tax.
Is this position “pro-business?” No. Will it better the lives of South Carolinians? Not much. Will the alternative of cutting grocery sales taxes make a big difference in anyone’s well-being or financial circumstances? No.
Ideological black hole
So here we are, all of us, trapped in a “conservative” ideological black hole.
The ironclad notion that cutting taxes is more important than anything else exerts a pull that stifles far too many good ideas about how government can work effectively to serve the needs of the state and its citizens.
As a framework for debating this issue, consider the reductio ad absurdum: Why not eliminate all taxes at all levels of government. No police, no fire protection, no schools, no roads, no courts, no water and sewage systems, no national defense, just a blissful tax-free world.
You know, sort of like the Sudan or Afghanistan.
I’m a typical South Carolina small business owner. I started my business in my home 12 years ago, struggled a lot and finally began making money.
Along the way our company has created jobs for 30 people and offered a modest benefits package including group health coverage and a 401(k) plan.
I know from personal experience the pressures that health insurance and medical expenses place on small businesses and their employees. The General Assembly would take a great step forward in support of business in our state if it decided to apply revenue from a higher cigarette tax to the cost of providing insurance coverage to low-income workers.
And don’t forget that there are huge direct costs from smoking, including lost worker productivity, lost wages that would otherwise be used to support employees and their families and greatly increased medical costs from cancer and heart disease brought on by smoking.
In a sense, cigarette taxes are a “user fee” designed to make smokers pay something back into our health care system to help offset the additional costs of smoking.
By one estimate, the cost to the economy and health care system from smoking runs about $7 a pack, which makes a 32 cent tax seem like a bargain (for smokers, not for the public or the state).
When the Founding Fathers gave us a model for governing our country, they designed it so the system could bend without breaking under the stress of strongly opposing views on the role and scope of government.
They did not expect an ultimate and permanent victory for advocates of one viewpoint or the other; indeed, they wanted a government that would have its ideological twists and turns, but would naturally gravitate toward a state of balance between extremes.
Right now, things are out of balance in South Carolina. The governing party should consider that it’s possible to be fiscally prudent and still recognize the benefits of raising tax revenues to achieve important public policy goals.
Such is the case with the cigarette tax and the idea of using the proceeds to help provide health coverage for low-income workers and their families.
It is frustrating to see our political leadership take one step forward and two steps back, again and again. Reliving Groundhog Day is a great movie plot, but a lousy way to run a state.
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