Policy Documents

Debunking the "Tax Thee, But Not Me" Myth: Five Reasons Why

Kristina Rasmussen –
March 20, 2008

Smokers are easy targets for elected officials looking to increase government revenue and score political points by punishing "unpopular" activities. The sheer number of recent tobacco tax hikes vividly illustrates this trend: Cigarettes taxes were increased 72 separate times in 43 states from 2000 to 2007.[1]

Broad-based tax increases (e.g., sales tax hikes) are often opposed by wide swaths of the population precisely because they directly affect many people. On the other hand, significant segments of the non-smoking population go along with efforts to raise tobacco excise taxes because these taxpayers believe they can avoid the resulting pinch by simply not buying cigarettes. It's a classic case of a "tax thee, but not me" mentality backed up by the logic of "if the government is going to spend the money anyway, let them take it from someone else."

However, this kind of approach doesn't hold up to scrutiny. Analyses of state fiscal habits from 2000 and onward show that tobacco tax hikes have very real fiscal implications for non-smoking taxpayers. This Issue Brief explores the following five reasons tax-sensitive non-smokers should oppose high cigarette taxes:

1.     States with low cigarette taxes tend to have lower overall tax burdens;
2.     Tobacco tax hikes are rarely used to cut other taxes;
3.     Tobacco tax hikes don't forestall other tax increases;
4.     Tobacco tax hikes may encourage other tax hikes down the road; and
5.     Tobacco taxes don't spur economic growth.

Granted, the research presented in this paper won't mean much for those who favor higher taxes no matter what, but these findings should resonate with non-smoking individuals who prefer to retain more of their own money.