Hacker Curve: Quitting Smoking Is Bad for The Children

California's use of taxes on smokers to fund pipe-dream programs for kids may finally cause state-run charities to cough up a lung.

First 5 California, the universal pre-school brainchild of Hollywood triple threat Rob Reiner, has been flush with revenues stemming from a 1998 initiative that laid a new tax on cigarette sales and funneled that money into a school-for-tots scheme. Taxes like these are always sold as a win-win: They discourage smoking while raising revenues for a good cause. But the combination of state and federal taxes is starting to do more of the former than the latter, as smokers quit, cut back, or start buying smokes out of state. It's the Laffer Curve in reverse: If you tax something out of existence, you won't get anymore revenue from it, and then taxpayers will have to cover your commitments. The Inland Valley Daily Bulletin reports:

First 5 organizations benefit from Proposition 10, which went on the books in 1998 and allocates 50 cents from the sale of every cigarette pack to providing services to children in the first five years of their lives. Prop. 10 actually led to the creation of the First 5 initiative.

These organizations are nervously watching the impact of a federal cigarette tax boost, which took effect April 1, 2009. It was a 62 cent-per- pack increase to $1.01, which doubled the previous federal tax.

The state tax is 87 cents, and that includes Prop. 10 and Prop. 99, another item that uses money from cigarette sales for health and education programs, said Anita Gore, spokeswoman for the California Board of Equalization.

Then, there's a sales tax.

In parts of San Bernardino County, the out-the-door price for a pack of Marlboros can range from $5.35 to $6.80.

Cigarette tax revenues have been down a little more than 10 percent since the federal tax was increased, Scott said.

In 2002, I wrote about how the Prop 10/First 5 campaign turned the Meathead into a political power in California—and how declining tobacco revenues would eventually leave taxpayers on the hook for programs based on the scientifically dubious "first five years" movement. In 2006, Reiner's political career came crashing down when he had to resign his post at First 5 in the face of a $23 million misappropriation scandal. Chris Reed of the San Diego Union-Tribune wonders whether Reiner should be facing criminal charges over those old high jinx.