State Net Capitol Journal – March 24, 2014; Ohioans Debate Impact Of Tobacco Tax Hike On State's Smokers

Budget & Taxes

OHIOANS DEBATE IMPACT OF TOBACCO TAX HIKE ON STATE'S SMOKERS: Some Ohioans believe Gov. John Kasich's (R) proposal this month to raise the tax on every pack of cigarettes sold in Ohio by 60 cents to help pay for an income tax cut would have the added benefit of getting residents to stop smoking.

"Higher taxes do encourage adults, even long-time smokers, to attempt to quit," said Micah Berman, a professor of public health and law at Ohio State University and former advisor to the U.S. Food and Drug Administration's Center on Tobacco Products.

The Campaign for Tobacco Free Kids says cigarette consumption can drop by as much as 5 percent with each 10-percent increase in the price of a pack of cigarettes, which is just about how much the price of a pack of cigarettes in Ohio — currently around $6 — would go up under Kasich's plan. The governor's plan assumes a substantially more optimistic decline of 11 percent, once the tax is fully phased in.

But Robert Kaestner, an economics professor at the University of Illinois, said raising Ohio's cigarette tax by 60 cents would only reduce the number of residents who smoke, currently just under a quarter of the state's total population, by 1 percent, although that still means there would be about 25,000 fewer smokers in the state.

Kaestner collaborated on a study with Kevin Callison, an economics professor at Grand Valley State University in Michigan, that found it takes big increases in cigarette taxes to bring about even small reductions in the number of smokers.

"When states try and pitch these cigarette tax increases as a benefit to public health, that tends to be overstated," Callison said. "If you really wanted to make a public health difference you would just increase the tax exponentially."

He added that raising the tax in relatively small increments instead is more effective at generating state revenue.

Some Democrats and progressives oppose Kasich's plan because they say it would disproportionally impact the poor, who tend to smoke in greater numbers than those who earn higher incomes.

"I used to smoke, I'm glad I quit, and I wish everyone would. Where I take issue is in expecting poor people to pay the lion's share of yet another income tax cut," said Bill Faith, executive director of the Coalition on Homelessness and Housing in Ohio

But Kasich's proposal has also drawn criticism from fellow Republicans like Sen. Bill Seitz, who is a smoker but says he opposes the plan on principal because it's ultimately aimed at lowering income taxes for individuals in Ohio's top tax bracket — those earning over $208,500 a year — who make up between 2 and 3 percent of the state's population.

"What you are doing is hitting somewhere between 20 and 25 percent of the population who smoke to pay for an objective that benefits 2.5 percent of the people in Ohio," he said.

The fact that Kasich's proposal also includes a tax increase for businesses and producers of fossil fuels through fracking suggests that it will probably draw plenty more opposition in the state's Republican controlled General Assembly. (CINCINNATI.COM, STATE NET)

ALARMING RISE IN NUMBER OF IL SCHOOLS IN FINANCIAL TROUBLE: Two years ago, the report card Illinois issues each year on the fiscal health of its schools revealed that a disturbing number of districts were in poor to dismal financial shape, placing in the bottom two ratings categories, "financial early warning" and "financial watch." But the state's latest report card, based on the budget year ending June 30, 2013, was even more alarming, showing that as a result of an ongoing state budget crisis that has forced the reduction of aid to schools and rising education costs, the number of school districts in the bottom two ratings categories has more than doubled, to 121.

Those districts encompass nearly a third of Illinois' entire school population and include the enormous Chicago Public Schools system, which dropped to the second lowest category in the latest analysis. That analysis also indicated that 62 percent of the state's districts are now deficit-spending, including affluent schools in Winnetka and Wilmette, and districts are also borrowing more money to avert deficits, saddling taxpayers with more debt in the process.

"This is a highly dangerous practice," said Gery Chico, chairman of the Illinois State Board of Education.

State School Supt. Chris Koch, who was scheduled to appear before a legislative committee last week to discuss possible education cuts, said the schools' financial troubles were impacting everything from class size to the availability of art and music courses.

The one bright spot in the report card was the fact that 560 of the state's school districts achieved the highest rating, "financial recognition." But even that number is down significantly from two years ago, when 670 districts earned that rating. (CHICAGO TRIBUNE)

BUDGETS IN BRIEF: The nonpartisan COLORADO Legislative Council released a forecast last week predicting taxes on recreational marijuana would generate about $65 million next fiscal year, only half of what Gov. John Hickenlooper (D) predicted (DENVER POST, STATE NET). • NEW MEXICO Gov. Susana Martinez (R) is considering calling a special legislative session to complete a package of economic incentives to try to lure Tesla Motors' planned $5 billion battery manufacturing plant to the state (ALBUQUERQUE JOURNAL, STATE NET). • WEST VIRGINIA lawmakers approved a budget that taps $147.5 million from the state's $922 million Rainy Day Fund to help cover a projected shortfall. The spending plan also includes across-the-board $1,000 raises for teachers and $504 raises for other public employees (CHARLESTON DAILY MAIL).

- Compiled by KOREY CLARK

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