(Alexandria, Va.) -- The 362,000-member National Taxpayers Union (NTU) has applauded South Carolina Gov. Mark Sanford (R) for his decision late yesterday to veto a 50-cent increase in the state's cigarette tax of 7 cents. NTU also offered praise to the state House of Representatives for upholding that veto shortly afterward.
"While smoking and other 'unpopular' activities are easy targets for revenue-hungry politicians, Gov. Sanford recognizes the harmful effects of such a punitive tax -- on smokers and non-smokers alike," NTU Director of Government Affairs Kristina Rasmussen said. "Instead of saddling South Carolinians with what he calls 'two tax increases' -- a cigarette tax now to fund new health care initiatives and another tax later to fund the program's growth -- Gov. Sanford stood up for taxpayers."
NTU also firmly opposed an increase in the state's cigarette tax when Sanford offered a 30-cent hike as part of a "tax swap" package in late 2006 to provide income tax relief, Rasmussen noted. "NTU's more than 4,100 South Carolina members appreciate the Governor's support of fiscally responsible tax relief made possible through spending restraint -- not punitive taxes," she said.
A recent NTU study highlights several reasons tobacco taxes hurt all taxpayers, regardless of tobacco use. First, states with low cigarette taxes tend to have lower overall tax burdens. South Carolina's per capita state and local tax burden is $3,213 -- about $1,200 less than the average high-cigarette-tax state. Elevated tobacco taxes reflect a propensity to tax other types of activities and products.
Second, tobacco tax increases do not prevent future hikes, and may even encourage tax increases elsewhere. Taxpayers face a seven out of 10 chance of seeing another net annual tax hike within two years of a cigarette tax increase. New tobacco revenue often is tied to spiraling spending plans (such as government-funded health care), yet tobacco use rates and potential tax collections are falling. Non-smokers could be on the hook to fill that gap.
Finally, tobacco taxes don't spur economic growth. States adopting a tobacco tax hike in 2003 experienced a growth rate from 2005 to 2006 that was 0.6 percent lower than states that didn't.
"Rather than targeting specific segments of the population to fill government's coffers, elected leaders should focus on eliminating wasteful spending," Rasmussen concluded. "Kudos to Gov. Sanford -- and the South Carolina House of Representatives, which upheld his veto -- for withstanding political pressure and protecting taxpayers."
NTU is a nonpartisan, nonprofit citizen organization founded in 1969 to work for lower taxes, smaller government, and economic freedom at all levels. Note: For more information on NTU's tobacco tax policy, visit www.ntu.org.