Government Spending

Tyke Hike

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"Here's an opportunity to make a major investment in young children and to get kids to stop smoking," film director Rob Reiner recently told The New York Times, describing the ballot initiative he's pushing in California. "How can anyone oppose it?"

Reiner (best known for his portrayal of "Meathead" on the sitcom All in the Family) may be baffled, but some of us are not happy to see advocates of increased government spending overcome anti-tax sentiment by targeting an unpopular minority. That trend, which California helped start a decade ago with Proposition 99, is apt to accelerate if voters approve Reiner's initiative on November 3.

Proposition 10, a.k.a. the California Children and Families First Initiative, would raise the state's cigarette tax by 50 cents a pack, making it the third highest in the nation. Most of the additional revenue–some $700 million in the first year–would be distributed to a hodgepodge of programs aimed at improving California's toddlers.

Reiner, you see, is very excited about the notion that the first few years of life are crucial in determining how people fare from kindergarten through adulthood. Proposition 10 is supposed to create "an integrated, comprehensive and collaborative system of information and services to enhance optimal early childhood development."

I'm not sure how you "enhance" something that is already "optimal," but it seems to involve throwing a lot of money around. Four-fifths of the revenue raised by the initiative would go to 58 county-level "children and family first commissions," which would be free to spend it on just about anything that could be said to help little kids.

The possibility that such unrestricted largess might lead to wasteful, haphazard, and duplicative programs does not seem to faze Proposition 10 enthusiasts, who include famous actors such as Martin Sheen and Charlton Heston as well as multimillionaires such as former congressman Michael Huffington and Los Angeles Mayor Richard Riordan. These rich guys bravely insist that other people should be forced to pay for their pet project.

What makes this demand especially audacious is the economic profile of the people that Reiner et al. want to stick with the bill. As a group, cigarette smokers are less affluent than nonsmokers; tobacco taxes (which, like consumption taxes generally, are regressive to begin with) therefore hit the poor especially hard.

Reiner's 50-cent tax hike would cost someone who smokes a pack and a half of cigarettes a day an extra $274 annually. That may seem like a drop in the bucket to Proposition 10's supporters, but it's real money to people of modest means.

To justify this burden, the initiative's defenders claim that smokers impose costs on taxpayers. But because smokers tend to die earlier than nonsmokers, the costs of treating tobacco-related illness have to be weighed against savings on Social Security, nursing home stays, and medical care in old age.

Every study that takes such long-term savings into account, including analyses by the RAND Corporation and the Congressional Research Service, has found that higher cigarette taxes are not justified by the costs associated with smoking. In a 1994 paper on the subject, economist W. Kip Viscusi found that, if anything, smokers are saving taxpayers money.

Proposition 10's supporters are on firmer ground when they say a price increase would discourage underage smoking. But even here, skepticism is appropriate.

Predictions about the impact of price increases on teenage smoking are based mainly on research comparing cigarette consumption in states with different tobacco taxes. Those studies do not take into account the fact that the social climate in states with lower taxes tends to be less hostile toward smoking.

A recent study by economists at Cornell who tried to avoid this problem indicates that teenagers may be much less responsive to cigarette tax increases than was previously thought. The researchers estimated that a price hike of $1.50 a pack–three times the proposed California increase–would reduce the rate at which teenagers start smoking by just two percentage points.

Even if Reiner's tax hike would substantially reduce underage smoking, this approach imposes a burden on all smokers, regardless of age, to deter a small minority who are not legally permitted to buy cigarettes in the first place. It's akin to taxing R-rated movies so children can't afford them–a proposal that Reiner and his friends are not likely to get behind, no matter how the money is spent.