Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, January 29, 1994 TAG: 9402010248
SECTION: EDITORIAL PAGE: A9 EDITION: METRO
SOURCE: HARRY LEA
DATELINE: LENGTH: Long
The fact is, however, that everyone - not just those who use or work with tobacco - would pay for this plan.
Tobacco does pay the bills for those who are growers, warehousemen, manufacturers, retailers and thousands of others who supply our businesses. But it's broader than that. Tobacco is interwoven into our region's economy - a dollar spent here is spent several times over for all kinds of non-tobacco goods and services, which means jobs and security for thousands. Directly or indirectly, tobacco has helped pay for our roads, schools, hospitals and many of our cultural, spiritual and social institutions.
Now all of that is in jeopardy.
The Clinton administration proposes to pay for national, government-run health care by increasing the federal cigarette tax to an overwhelming 99 cents a pack. At 24 cents a pack, the current federal tax is already unfairly high.
Tobacco provides 2.3 million Americans with jobs across all 50 states, directly and indirectly. Companies and employees involved with tobacco pay more than $6.5 billion in payroll taxes to the federal government each year, and another billion-plus to the states. Cigarette excise taxes contribute another $12 billion to state and federal treasuries. Price Waterhouse, a major international accounting firm, recently completed an economic analysis of tobacco. Based on that analysis, we know that a 75-cents-a-pack increase in the excise tax would mean a loss of almost 20,000 farming jobs. Additionally, 5,500 wholesale trade jobs would be gone; some 20,000 retail jobs would be eliminated; and another 6,000 manufacturing jobs would vanish.
Thousands of businesses - from paper companies to computer makers to advertisers - supply the tobacco industry. With a 75-cents-a-pack excise-tax increase, more than 30,000 jobs would evaporate from this tobacco-supplier sector of the U.S. economy. With the loss of all these workers and their paychecks that buy food, clothing and everything else families require, the destructive ripple of tobacco unemployment would reach far and wide, and add another 192,000 more Americans to the jobless rolls.
The total economic damage in terms of unemployment with a 75-cents-a-pack increase: 273,000 jobs and $8 billion in paychecks - gone. In Virginia, losses of indirect and direct tobacco jobs would total more than 15,000, representing a lost payroll of $432 million, much of that right here in our part of Virginia.
But that's not all. Cigarette taxes traditionally have been a source for generating revenues at the state level. The revenues collected from every pack of cigarettes sold in each state help pay for important services, including education. But if the federal government in Washington decides to raise the federal tax, then the states will lose state excise-tax revenue when cigarette sales drop.
Based on the Price Waterhouse data, the states stand to lose $880 million in state excise taxes with a 75-cent increase. That's $880 million that's either got to be made up through new state taxes or through reductions in state services. What will be cut? Education? Support for the elderly?
The economic arguments - the clear-cut facts on how this tax proposal would harm the American economy - are most compelling. But there are other reasons why a federal cigarette-tax increase is a bad idea.
High cigarette taxes will lead to smuggling and more crime: Since raising cigarette taxes in the early '90s, Canada has become a breeding ground for organized crime - armed robberies of retail stores, cigarette distributors and trucks carrying tobacco are at record levels. So is smuggling. The Canadian government is losing as much as $1 billion as a result. Gangs and organized crime are finding illegally obtained tobacco as profitable as drugs. President Clinton's plan will wipe out many of our jobs, but create a growth industry for criminals here, as in Canada.
Cigarette taxes are high enough already: Besides the $6 billion in federal taxes, smokers also pay another $6 billion in state and local cigarette taxes. For a pack-and-a-half-a-day smoker, this translates, on average, to nearly $300 a year.
Smokers already pay their fair share: According to an article in ``The Journal of the American Medical Association'' (March 17, 1989), ``On balance, smokers probably pay their way with the current level of excise taxes on cigarettes.'' And that statement was made before two federal excise-tax increases and scores of increases at the state level.
Given all the reasons why a major tobacco excise-tax increase is a bad idea, a surprisingly large percentage of Americans seem to favor such a tax. Or is it so surprising? Three-fourths of American adults don't smoke, and proponents of the tax have been doing nothing to discourage people from assuming that if they don't smoke there'll be no economic price to pay for this tax.
We know better. We know that, if enacted, it would cost America hundreds of thousands of jobs, take billions of dollars out of the economy, significantly reduce revenue for the states and encourage more crime. Never have we faced such a critical issue.
Harry Lea is president of Virginia Flue-Cured Warehousemen's Association, Inc. in Danville.
by CNB