Oct 24
Cigarettes & Sin (Taxes)
2009 at 10:15 am | posted by Rep. Craig Frank 4 comments
Resurfacing in the media is the annual Cigarette/Tobacco Tax Increase proposal by some members of the Utah legislature who are looking for easy answers to tough questions regarding budget shortfalls. Gehrke at the Salt Lake Tribune reports that some legislators are looking to substantially increase a targeted sin tax on tobacco product consumers to help plug the estimated $850 million in budget shortfalls for FY11.
One tax increase proposal raises Utah’s current 69.5 cent tax up to $2.00 per pack, which would make Utah the 11th highest per pack tax rate in the country.
Read this previous Under the Dome post for more information:
Smokin’ a Butt Gonna Cost You More?
October 24th, 2009 at 3:48 pm
Their taking the easy way out, and its going to bite them in the rear.
My suggestion would be to go ahead and raise the sin taxes but also to start sliding the income and sales taxes up so that when 2011 hits their isn’t a sudden and large increase smacking everyone in the head, and who knows if the economy recovers in the meanwhile the tax can be rolled back.
In the future I would suggest the state launch a study to find out what the minimum tax rate needed to make it though a moderate recession so that the state can avoid dropping the rate below that floor and ending up where it is right now, dependent on federal stimulus dollars(ARRA). The state can use the excess during boom times to increase the rainy day fund, promote business, and other 1 time purchases.
We had best prepare for a few more recessions, until congress reinstates deposit requirements on the banks that are FDIC insured and regulates the derivatives markets we are going to have more recessions.
October 24th, 2009 at 6:27 pm
I suppose I should also note that the Medicaid mandates are about to be increased, the state should take this into consideration in whatever they do.
November 9th, 2009 at 7:49 pm
@ Ronald, I’m not sure if I understood your argument correctly, but if I did it sounded like you oppose tax cuts if in the future taxes might have to be raised again.
If that is what you meant, then I think the tail is wagging the dog for you. Whatever the proper roll of government is should be paid for through taxes. Taxes should be set at that level, not above it.
I don’t think the problem in Utah is that taxes were cut too low during the good times, but rather that the role of government was expanded because there seemed to be so much money to go around.
November 9th, 2009 at 9:05 pm
expanded roll of government is not a problem in Utah. The proper roll of government in respect to tax’s is to collect enough to cover costs and to cover costs in the future. Because the states don’t own the money printing press and Utah is rightfully reluctant to run a deficit then the state needs to collect enough extra to put into a rainy day fund for when revenues are down.
The state does have the rainy day fund, but like many things in the state its woefully underfunded. Utah should have not lowered the tax’s a few years back and instead rolled that money into the rainy day fund until their was enough to cover a 30% loss in revenue over a 4-5 year period.
Once the fund can reach that minimum then you lower tax’s and not a second before.
Yes lower tax’s is popular, everyone loves lower tax’s but we also need to be fiscally responsible. Having tax’s on a roller coaster where the rate goes up during downturns and down during upturns is bad policy and hurts the economy and slows down recovery’s from downturns.