The Budget Just Keeps Getting Worse And Worse….

The Legislature is meeting in a conference committee to decide the fate of the budget. They must have a budget passed and sent by the governor by 6:00PM tomorrow.

One of the sticking points between the House and the Senate is how much we’re going to raise the tobacco tax. The Senate approved a bill raising it from the current $0.32 a pack to $1.08 a pack. The House only wants to raise it to $0.68 cents a pack.

It hasn’t gone unnoticed. As Jeff Sadow reminded us today that Speaker Chuck Kleckley and State Rep. Lance Harris, the head of the Republican legislative delegation, own convenience store chains.

Yet Harris and Kleckley have been perhaps the two most vocal opponents against signing on to the Senate’s much higher proposed level. And perhaps that’s not an accident, as they both own convenience stores that do a lot of business selling tobacco, allowing catering to a special interest to take precedence over the people’s interests.

Regardless of motive, this disconnection is exemplified by Harris’ thoughts on a higher cigarette tax level, where he declared on the floor concerning one higher than the House’s preference “It’s not fair to put it on the backs of a small segment of society.” If you’re a conservative, that misses the point entirely: the primary purpose of the cigarette tax is not to extract wealth but to have people take responsibility for the costs that otherwise they externalize to everybody else.

Here’s a tweet from Steve Spires of the Louisiana Budget Project (stopped watch and all that) explaining why Kleckley’s tax plan is a dumb idea:

https://twitter.com/SpiresLBP/status/608714143533654016

I would also add that it would be an increase of yet another uncompetetive tax for Louisiana business. Many states have moved away from taxing utility use by businesses because it is a cost of doing business. Taxing the inputs of a business causes double taxation.

But we shouldn’t kid ourselves that the cigarette tax increase will bring in the revenue the state needs. The cigarette tax rate being proposed by both the Senate and House would still have Louisiana’s cigarette taxes below that of Arkansas and Texas and not even close to approaching the national average. The best argument for the higher cigarette tax rate vs the increase in the tax on business utilities is that it does the least amount of fiscal harm and may provide long-term health benefits and cost savings.

But that makes too much sense for the House to go along with.

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