Once Again, Raising Taxes Reduces Revenue

Cigarette sales in California plunged to their lowest level in a decade last year as smokers were squeezed by new taxes and restrictions on where they could light up.

. . .

[T]he decline in smoking also means $74 million in tax revenues have disappeared like a puff of smoke, leaving health programs that rely on cigarette taxes to look for other ways to pay for services.

Who’d have thought that could happen. Oh, that’s right, WE would. Back in 2006 a Reason analysis of proposed higher tobacco taxes said:

Tobacco tax revenues will initially cover the costs of new programs and expansion of health care benefits, but as tobacco sales continue to decline, programs founded on California’s tobacco consumers will be left stranded with budgetary needs far above the dedicated revenue stream.

Well, waddya know.

Adrian Moore

Adrian Moore, Ph.D., is vice president of policy at Reason Foundation, a non-profit think tank advancing free minds and free markets. Moore leads Reason's policy implementation efforts and conducts his own research on topics such as privatization, government and regulatory reform, air quality, transportation and urban growth, prisons and utilities.