This Capitol Corner article is also posted on our members-only site, and GPHA members are encouraged to log in, make comments and discuss these important issues.
Remarks to Special Council on Tax Reform and Fairness for Georgians
By Scott Maxwell of Mathews & Maxwell, Inc.
The Council on Tax Reform held a public hearing last week, and Scott Maxwell offered the following testimony on behalf of the Georgia Public Health Association.
My name is Scott Maxwell and I represent the Georgia Public Health Association. You may wonder what interest public health advocates have in tax policy.
Allow me to explain . . . Georgia’s public health professionals view as their patient — the State of Georgia. That is, the entire population — which includes our workforce. GPHA recognizes that tobacco use is a major health problem. In short, cigarettes make our patient sick.
So here’s the connection . . . higher tobacco taxes reduce consumption, especially among youth. Even the tobacco companies admit this fact. An R.J. Reynolds memo stated, “If prices were 10% higher, the 12-17 (year old) incidence would be 11.9% lower.”
Now keep that in mind when you hear this . . . Ninety percent of those smoking today started before they were 19. So, reduce youth smoking through taxation and you’ve reduced smoking rates for a lifetime. The result? Our patient – which includes Georgia’s workforce — will be much healthier.
Much has been said about the need for this Council to review existing tax exemptions. My argument is that tobacco currently receives a significant tax exemption in Georgia and should be included in that basket for reform.
Here’s why. At 37 cents per pack, our tax is so low that we could raise it one dollar and STILL be below the national average. Compared to the rest of the nation, we’re giving tobacco a partial tax exemption!
Second, Medicaid is spending $319 million more annually on smoking-caused illnesses than the state collects in cigarette taxes. We are giving tobacco a tax break over what smoking costs the state! And these figures do not include what we spend on the State Health Benefit Plan or the University System Plan, where almost three-quarters of an employee’s premium is taxpayer-funded.
These are sound, logical reasons for the Council to consider tobacco among those items currently receiving a tax exemption. Not a complete exemption, but certainly a major exemption.
You are serving on the Council for Tax Reform and FAIRNESS for Georgians.
The Georgia Medicaid program spends $534 million on smoking-caused illness. We collect only about $218 million in cigarette taxes. That means that $319 million in cigarette taxes are really paid by the rest of us. And why? So Georgia’s teenagers can buy some of the cheapest cigarettes in the nation! Does that sound fair?
Consequently, we’re not really talking about raising a tax. The issue is, do we continue to tax everyone for tobacco-caused illness, or do we make it more of a user’s fee?
GPHA supports raising the cigarette excise tax by a buck a pack. If we did, Georgia’s rate would still rank 25th among states — dead in the middle. That sounds fair.
Only three states have a lower excise tax on cigarettes. In the past five years all of our neighboring states except Alabama have raised their cigarette taxes. Fair enough then, if we do, too.
By reducing consumption we can reduce what Georgia pays out for smoking-related health care. But can we even calculate the increased revenues that would result from a reduced smoking rate?
Certainly there would be fewer cigarette breaks and fewer days missed from work due to smoking-related illness. And, consequently, businesses, small and large, would realize greater productivity (and perhaps lower insurance premiums). Doesn’t that mean they will end up with higher profits, thus growing state revenues? Won’t individuals work more hours and days at the nursery, construction site, or small business, thus earning more money and enhancing state income and sales tax returns?
There are many statistics and arguments favoring an increase in the tobacco excise tax. For the public health community, Georgia’s bottom-of-the-barrel tobacco tax is foremost a health issue. But for this Council, I think it qualifies as both a tax exemption issue . . . and a fairness issue.
If we remove the tax exemption for tobacco — in fairness to all Georgians who are currently picking up the slack — then at a dollar more per pack, we will generate at least $350 million and relieve some of the stress on other revenue sources.