Up in Smoke

Gov. Tim Kaine proposes raising Virginia's cigarette tax to help balance the state budget without making further cuts in important services such as Medicaid. There are sound reasons to support such a hike. Cigarettes hardly qualify as essential; people certainly don't need them the way they need, say, medical care. Virginia has a fairly low tobacco tax. And Kaine is not trying to balance the budget on the backs of the Old Dominion's tobacco industry. The tax hike is just one part of a series of measures, including budget cuts and layoffs in the state workforce.

While some might argue Kaine is singling out a specific industry, that's not really true either. During his tenure the governor has proposed numerous other tax hikes, from raising car titling and registration fees to hiking the real-estate grantor's tax and regional retail sales taxes.

Yet there also are sound reasons to view the increase in cigarette taxes with skepticism.

For one thing, it probably won't bring in as much revenue as promised. New Jersey hoped to reap an additional $30 million from a cig-tax hike in 2007. Revenue from smokes actually fell. And when Maryland doubled its cigarette tax, sales fell by almost a quarter. That speaks to the conflicting aims of tobacco taxes: While government officials say they will bring in more money, health activists say they will reduce consumption. The two can't always have it both ways.

For another, friends of the industry note that using higher cigarette taxes for health care seems like double-dipping. A decade ago, Virginia and other states entered into a master settlement ending state lawsuits against tobacco companies, which they had filed -- ostensibly -- to recover public funds spent on tobacco-related illnesses, as well as to discourage future tobacco use. The master settlement agreement called for the tobacco companies to shell out in excess of $200 billion over the next two and a half decades. Virginia's estimated take: more than $4 billion -- of which it has received about $1.23 billion so far.

But Virginia has spent a sizeable portion of its settlement proceeds on other pursuits, including economic development projects principally in Southside and Southwest Virginia. It has given some of the money to tobacco growers. Less than a third has gone to support of Medicaid, and less than a fifth for smoking prevention. (Indeed, after declining in the early part of the decade the rate of smoking among young people in Virginia leveled off and might even have gone up slightly.) What's more, in 2003 the General Assembly dipped into the tobacco-settlement fund to help close a budget gap. Now the governor proposes taxing tobacco -- to help close a budget gap.

If Virginia had used the settlement money for its intended purposes, then the governor probably would not find it necessary to shore up Medicaid funding now. So the strongest argument against raising the cigarette tax might be this question: If state leaders could not be trusted to use money from the tobacco settlement agreement as they should have then, why should voters trust them with more money from higher tobacco taxes now?