Dip in smoking might mean a dip in revenue
Reduced tobacco use puts bite on programs
By Ed Sealover, Rocky Mountain News
Published December 3, 2008 at 12:05 a.m.
Updated December 3, 2008 at 10:44 a.m.
Photo by Matt McClain / The Rocky
Ron Parsons, of Lakewood, smokes a cigarette as he stands near his shopping cart while waiting for a ride from a friend.
Photo by Barry Gutierrez / The Rocky
Sean Ball, 31, of Denver, smokes a cigar from Nicaragua at Cigars on Sixth on Tuesday. Adult smoking rates have decreased in two of the past three years.
The 2004 state tax increase on cigarettes and tobacco products had two goals: decrease smoking rates and increase funding for health care programs in Colorado.
Four years after the passage of Amendment 35, the tax is meeting one target so well that it is hurting the other.
Adult smoking rates have decreased in two of the past three years and teen smoking already is below the 2010 goal set by a national coalition of health care professionals.
But because increasing funding for anti-smoking programs - coupled with the higher tax and a growing social stigma attached to smoking - is reducing the number of Colorado smokers, the amount of money coming in is falling, too.
Declines in forecast
Amendment 35 brought in $169.6 million in its first year. That number has fallen two straight years, and budget forecasts show continued declines that could leave program recipients with $135.5 million in fiscal year 2011-12 - a 20 percent drop before inflation is factored in.
Legislators and authors of the law say they anticipated this erosion and feel safe in having allocated most of the new money in yearly grants that can be reduced without great upheaval. But 46 percent of revenues go to increasing the number of low-income Coloradans on public insurance programs like Medicaid and Children's Health Plan - a part of the budget that can't be chopped without inflicting harm.
"That's a problem if the funds aren't there, because you can't provide services if you don't have money. In the end, if we lose enough money, less kids will get services," said Sen. Betty Boyd, a Lakewood Democrat who sponsored the bill implementing the tax increase.
But she added: "If the money falls off, that's good news and bad news.
"And I think we celebrate the good news and hope that a dropoff in smoking reduces the cost of health care."
Smoking rates drop
In 2004, Colorado had a 20- cents-a-pack cigarette excise tax, one of the lowest in the nation. Voters approved a tax increase of 64 cents a pack on the promise that revenues would be dedicated to health care and tobacco education.
Since then, the state's anti- smoking program has expanded its services. Adult smoking levels dropped from 20 percent in 2004 to 18.7 percent in 2007.
Teen smoking also has fallen to 14.6 percent, below the Healthy People 2010 goal of 16 percent, said Karen Phelan, state Tobacco Education and Prevention Partnership spokeswoman.
On the medical side, the state has increased the number of free breast and cervical cancer screenings it offers, as well as the work it does with poor and minority communities.
An unknown number of children and expectant mothers have been added to public insurance rolls because of cigarette tax revenues.
The future, however, may see changes with funding declines.
The Department of Health Care Policy and Financing, which oversees the Medicaid and CHP programs, has a reserve fund with $91.4 million in it. But it forecasts the fund will be completely depleted by July 2012 if it is to continue providing services at the current level.
Law imposed restrictions
The 2005 law that enacted the tax specifies percentages of revenue that must go for programs such as public health insurance, community clinics and anti-smoking programs. Because of that, the state cannot cut grants for smoking cessation programs while keeping the same amount of money in place for Medicaid and CHP as revenue declines.
The state could cut the income level at which families are eligible for public insurance, but that would reverse years of expanding eligibility, said Sen. John Morse, D-Colorado Springs.
Looking to other states isn't likely to offer help either, since many have seen similar revenue drop-offs after initial boosts and have moved to raise other taxes, said John Nothdurft, budget and tax legislative specialist for the conservative Heartland Institute.
"These are not real sustainable taxes. They're going down," Nothdurft said. "It's not a huge jackpot."
Smuggling gets part of blame for falling revenue
Cigarette-tax revenues are falling, and fewer smokers isn't the only reason.
According to a study released Tuesday, cigarette smuggling nationwide is on the rise.
The study, by the free-market Mackinac Center for Public Policy of Michigan, estimates 18.1 percent of cigarettes consumed in Colorado in 2006 were smuggled into the state.
That definition includes cigarettes purchased at a lower tax rate across state borders, cigarettes bought on the Internet and black-market cigarettes sold by people without licenses to do so.
Smuggling numbers rise as cigarette taxes go up, author Mi chael LaFaive said. Colorado, for example, had an average smuggling rate of just 5.9 percent from 1990 to 2006 but saw numbers spike in recent years.
"If (states) don't factor smuggling into their revenue forecasts, they will almost always be wrong about the amount of revenue they think they can raise," LaFaive said.
The Colorado Department of Revenue conducts random checks on cigarette wholesalers and retailers to see if they are selling packs that lack the stamps proving they've paid the excise tax, spokesman Mark Couch said.
The department does not have the personnel to track down Coloradans who buy cigarettes illegally online, even though it knows such sales cost the state about $204,000 a year in lost tax revenue, he said.
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December 3, 2008
4:39 a.m.
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Brian1973 writes:
let's see the gov't put a tax on smoking........ raising the price a bit...... then they started all sorts of stop smoking campaigns.........
and it's news that the cigarrette tax revenue dropped?
December 3, 2008
4:56 a.m.
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roger44 writes:
The state of colorado is like most states, these politicians shot themselves in the foot, now they're crying about it. And they don't spend the settlement for it's intended purposes, they get multi millions from the tobacco companies a year. They could legally ban tobacco from the state but won't because they would then lose that income. it was because the state said they had to pay for a lot of smokers illnesses, if you get lung cancer and smoke, tell them to send the medical bills to the state, they are the ones that got the money for problem. I cross state lines to buy sometimes, I go out of state to shop anyway, why not save a few bucks? new York has a high tax, you can bet many crimes have been committed to buy smokes, but the politicians will say not so. I would bet if they dropped the tax back to 20 cents, many would come across to buy cigs and the revenues would go back up, but they're not that smart. another factor they don't put in is the smoking ban, casinos have paid less taxes because the ban stopped people from going. go ahead colorado, raise it some more and create more criminals that smuggle them, Canada found out it doesn't work, may as well try it here.
December 3, 2008
5:47 a.m.
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Ike writes:
Quit smoking years ago and have mixed thoughts on the smoking ban. Weighing the dip in revenues and preventing more people (and their families watching) from suffering in Oncology seems a good trade off. As for roger44 thinking lowering taxes to encourage an increase in smoking revenue is similar to what our economy is suffering from right now and any minimal increase in revenue from that plan would be counter productive when weighed against our State's overall increase in just being healthier.
In our current state of government and its civic process I did have a problem with the Legislature passing their version of the No Smoking bill. Although it would never satisfy the periodic posters about the "Nanny State" and their "Right to Smoke;" a dime would get you a dollar that the People of the State of Colorado would overwhelmingly pass the No Smoking law in a general election. Then the cries that the Majority imposed their Will on the Minority would begin, but then again, that's the way it supposed to work, right?
Back to the point of the article, this drop in revenue is a good thing overall and we can hope the numbers continue to go down. In spite of what will be posted later in the day, this is good for the State and its People and the numbers decrease in the suffering Cancer patient population will bear this out.
December 3, 2008
6:01 a.m.
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Shadow writes:
Not to worry. Colorado is in good standing with the Obama administration. Gov. Ritter will get moved up in line and receive bailout funds for the short fall in smoking tax lost revenue. Then they will find something else to tax all in the name of paying for health care etc.
December 3, 2008
7:21 a.m.
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KING writes:
KING
this is typical dumocrat BS. you can't have you cake and eat it too. When you pick on a group of people, in this case smokers, to make an example of, then dont complain when the example works..da! The bottom line is that if you were really a good citizen and cared about health care then you would smoke so that there is revenue for it. If you dont smoke, then you are not a good person....
Bottom line is why dont governments stick to what is their role as defined in the constitution and not try to the cradle to grave approach with its citizenery?
cut spending and the problems will diminish
December 3, 2008
7:25 a.m.
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LingLingfor_prez writes:
I love it, maybe they should pay for a "cause and effect" study paid for with taxpayer dollars. Maybe then they can figure out why their revenue went down. LOL!
December 3, 2008
7:37 a.m.
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Logical writes:
King, you're an idiot! How can you even suggest that our politicians keep their noses out of our business and stick to the constitution? There would be much less opportunity for personal benefit if they did! No way will they give up all the perks from the lobbyists. (For those of you who can't see sarcasm when is slaps you across the face, I don't really think King is an idiot; he hit the nail on the head.)
I have an ad campaign that I think would help reduce smoking. But, when I looked at the tax revenue that would have to be made up out of my pocket if smoking were cut, I decided to let the idiots keep smoking. Yes, there would be less spent on healthcare, but the politicians wouldn't be happy with that trade-off of tax income and health expenditures. They would want the same level of tax income to spend elsewhere, so the net savings would be lost.
Politicians need to quit spending every dime (and then some) that comes in, and save some of it. Then they would not have budget issues every year.
December 3, 2008
8:12 a.m.
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Gonzopozo writes:
Yup, the government starts to depend on "sin tax" revenues and people a) stop sinning or b) find a way around paying the tax.
Jeez, this happens every time !
We need to tax whatever the government (State or Fed, they all do it) is smoking !!!
December 3, 2008
8:38 a.m.
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blacksho89 writes:
"Dip in smoking might mean a dip in revenue"
Ya think?
No S*** Sherlock?
Captain Obvious Strikes Again?
Rick Romero writing headlines for the Rocky?
Or just another example of idiot legislators?
December 3, 2008
8:57 a.m.
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beentheredonethat writes:
Time to tax the real health care crisis-- junk food-- to pay for medical care and the high price of obesity-related physical, social, and professional damage. Perhaps the consumption of trash foods will drop in proportion to some substantial tax hikes on it, and in the meanwhile, we can figure out how to accommodate a huge diabetic illegal population...
December 3, 2008
9:19 a.m.
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arvada_mark writes:
I've got an idea; I'll pay my own medical bills when I get sick, & you pay for yours. Deal?
December 3, 2008
9:24 a.m.
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KING writes:
arvada mark.....BINGO
in fact...why dont you take care of yourself and your family and everyone can do the same...then the need of government will reduce to what it is supposed to be...provide for the defense of the country and protect individual liberty....
December 3, 2008
9:27 a.m.
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kodijack writes:
Deal.
Besides the fact that I have less chance of dying because of cancer, and probably bankrupting my family in the process, quitting smoking means that my pack a day habit that was giving the state $233.60 a year out of my pocket is over. Sweet.
December 3, 2008
9:56 a.m.
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TheDenverB writes:
mark, king...
that's great and all until the rest of the country gets so sick that our workforce and infrastructure begins to decline as millions who can barely afford to put a roof over their head fail to get even the most basic medical care.
if you can't stand taking care of your fellow countrymen who need a bit of help staying healthy, then you need to run along to another country.
This is a great country because of how we treat and take care of our fellow Americans.
you both seem to need to learn that.
December 3, 2008
10:01 a.m.
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wow writes:
A pack per day habit is actually more like 1,800 per year.
Its a lot, but could be put toward the cost of a year's worth of health insurance premiums for a non smoker's family of 4.
Just a thought, bearing in mind that the government should stay the heck out of it, and let me make up my own mind about smoking and my health care.
December 3, 2008
10:04 a.m.
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CWW writes:
As soon as CO passed the increased tax on cigs, I started to buy mine LEGALLY from Indian reservations. No muss, no fuss, and they mail them to my door. Even with postage, it's $1.50 less a pack.
Sorry I'm not participating since "it's for the children" but I've had it up to here with taxes.
December 3, 2008
10:16 a.m.
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KING writes:
Yo Denver B,
I am not saying that taking care of people who need help is not important...im just saying its not the role of government. Private charity, such as the red cross, does the job better, more efficently, and cheaper than government ever could.
December 3, 2008
10:28 a.m.
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Dannyar writes:
TheDenverB,
A couple of quotations for you to ponder:
Whoever claims the right to redistribute the wealth produced by others is claiming the right to treat human beings as chattel. (Ayn Rand)
There is no virtue in compulsory government charity, and there is no virtue in advocating it. A politician who portrays himself as "caring" and "sensitive" because he wants to expand the government's charitable programs is merely saying that he's willing to try to do good with other people's money. Well, who isn't? And a voter who takes pride in supporting such programs is telling us that he'll do good with his own money -- if a gun is held to his head. (P.J. O'Rourke)
December 3, 2008
10:51 a.m.
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blindrid writes:
This is a primary reason that amendments should be tougher to get on the ballot. When this issue came up, I voted against it as the earmarked money that "must" go somewhere. Hell, I'm not a rocket scientist and figured this one out. That and I was surprised that there was a reserve of $90+MM. This with expanding the people that get a bit of a free ride certainly promotes the current socialism movement.
I think it's time to make sure only significant issues get placed on the ballot as amendments. Of course it's easy to pass issues that select a minority for funding sources but to combine amendments with NIMBY'ism is not a good mix.
December 3, 2008
11:05 a.m.
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Buckwheat writes:
That's Ok, good to see people quiting for their health (2pac a day, long ago). So where will the state make up the difference? Maybe an increased liquior tax? Sure, we can tax people out of drinking alcohol, then Starbucks, then......(hee,hee,hee)
December 3, 2008
11:24 a.m.
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Katoom writes:
Do you ever look at the losers who smoke? It is doubtful that they contribute much in the way of taxes or anything else positive to society. We should sent them all to Boulder, the smokiest city in Colorado, despite their anti-smoking laws. The typtical smoker can stand under the no smoking signs at 14th/Walnut puffing their cancer sticks and wondering what trash can will have lunch in it today.
December 3, 2008
11:27 a.m.
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jonmg111 writes:
Look what happens when you kill the goose that lays the golden egg.
December 3, 2008
11:49 a.m.
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JustSayin writes:
Whole thing (sin tax) was badly designed by legislators with little common sense. There seems to be this trend that every tax has to have something specific to spend the money on, otherwise the politicos don't have the guts to vote on it. This is a case where the higher tax is a good thing - creating an incentive to quit smoking because the price is too high. It's social engineering, yes, and I have no problems with that.
But they just should have put the money in the general fund. Instead they set up a series of feel good and probably ineffective anti-smoking programs relying specifically on the tax in order to justify it. DUMB!
Here's a real good option - pass a new bill unlinking the tax and the programs, get rid of the programs, and put the money in the general fund! More $$ in the fund, more b.s. programs done away with, (slightly) smaller government.
Glad to see that the "anti-socialist" purists of earlier posts are so independently wealthy that they think they can self insure their health costs. Just guessing here, 'cause I don't know you guys, but I'll bet you went to the same school of economics as Joe the Plumber - you know, the guy who didn't want to pay higher taxes, even though he wasn't anywhere close to the the income bracket he was complaining about? But, if you want to help your dentist buy that new hot tub for his mountain condo, for a few hours of work, be my guest.
Ayn Rand was a greedy old b^tch, and her writings (mostly fiction) where fine fodder when we were young and easily fooled college students of decades ago, but she's long dead, and we have real issues to deal with today. Even Greenspan, who worshiped at the feet of Rand, relied on business executives and institutions looking out for the common good - look where that's gotten us!
December 3, 2008
1:23 p.m.
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Dannyar writes:
"Ayn Rand was a greedy old b^tch..."- JustSayin
I would rather someone be a greedy old......and be selfish with her own money, than the be the most selfless and generous person...with MY money.
December 3, 2008
1:27 p.m.
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texacola writes:
beentheredonethat writes:
Time to tax the real health care crisis-- junk food-- to pay for medical care....
I agree. Tax junk food higher or raise the price. Probably won't happen.
It's crazy how healthy foods cost way more than junk food. That's why many lower income people have obesity problems. All they can afford is junk food. (This was a recent Rocky article).