Government Bytes


Obama‘s Big Plan: Higher Taxes for Programs that Don‘t Work

by Nan Swift / /

Only two months late and almost three weeks after the House and Senate passed their own versions, President Obama will unveil his budget this Wednesday. While specifics have been sparse, some of the details that have leaked over the past few days indicate more of the same tax and spend agenda taxpayers have come to expect from this Administration.

Among the big-ticket taxes the President is touting is another massive hike in federal tobacco taxes to fund the universal pre-K program the President spoke of during his State of the Union address earlier this year. The minority staff at the Senate Budget Committee explains the numbers over at the Weekly Standard:

"…  $100 billion for tobacco taxes to pay for universal pre-K.  We don’t know what the President’s exact proposal will be, but we know those taxes can be set to hit whatever number the President needs to pay for his pre-K policy.  The media today reports that the president will raise tobacco taxes to pay for universal pre-K.  We know from earlier reporting  that the President’s pre-K plan could cost between $10 and $25 billion, so $100 billion over 10 years is a reasonable number for the first 10 year cost of the program, and the new taxes needed to pay for it.”

NTU has written previously about the questionable notion of universal pre-K, essentially a massive expansion of the already costly and ineffective Head Start program.  To quote Time’s Joe Klein again, “Head Start simply does not work.” has a more recent look at early childhood education and Head Start in particular and finds that:

As of 2013, no one knows how to use government programs to provide large numbers of small children who are not flourishing with what they need. It’s not a matter of money. We just don’t know how.

To raise taxes and set an agenda for additional spending on something “we just don’t know how” to do is far from a responsible use of taxpayer dollars. Especially at time of sky-high debt and extremely sluggish economic growth, the government shouldn’t be raising taxes, especially not to fund programs with dubious results.

Calling for a new tax on cigarettes is an extremely blatant cash-grab on the part of the Obama Administration. Raising taxes on a relatively unpopular minority of the general public is a sure sign that an administration is out of ideas and hopes that few will speak-up to oppose the tax hikes. Even if you aren’t a smoker, it’s important to remember that tobacco taxes are a bad policy with widespread consequences.

Cigarette tax hikes are regressive, burdening poor households disproportionately. It’s also inherently unfair to fund a program purportedly for the use of all with a punitive tax on a small group of people. Besides, if the Administration wants people to boost the economy by spending more, it should leave some money in our pockets!

Small businesses also feel the pain of rising tobacco taxes. The National Association of Convenience Stores reports that sales of tobacco products comprised more than “42 percent of in-store revenue dollars for U.S. convenience stores in 2011.”  When taxes go up, sales go down due to cessation or because tobacco commerce moves to the black market.

These factors make tobacco taxes a historically unreliable source of revenue. Whether you are a state desperate to fill a budget gap or a President who wants to fund a new universal pre-K program, when tobacco taxes go up, the funding usually doesn’t meet expectations, thus leaving taxpayers, once again, holding the bag for bad policy and poor planning.

Instead of rolling out unnecessary, expensive new programs and imposing further pain on taxpayers and the economy in the process, President Obama should be focusing on where he and Congress can agree on entitlement reform and other measures to cut the debt that has a stranglehold on growth.