Pegasus Institute released a Tobacco Harm Reduction Plan today aimed at saving lives, and reducing costs to taxpayers. The plan calls for a $0.50 increase in the cigarette tax as part of state tax reform, which is expected take place next year, and calls for maintaining the current tax rate on smokeless tobacco and vaping products, as an effort to transition smokers to products which have fewer medical costs associated with them. The research and proposal, authored by University of Louisville Medical School professor Dr. Brad Rodu, and University of Louisville Research Economist Nantaporn Plurphanswat, has been endorsed by 16 academics affiliated with universities all across the United States, including Yale, Cornell, and NYU.
“The great thing about this proposal,” said Pegasus Institute Co-Executive Director Jordan Harris, “is that it provides a sound policy prescription. As our state works to transition away from production taxes and towards consumption taxes, this is a great way to do that while encouraging smokers to move to less harmful alternatives. The long term Medicare and Medicaid benefits would be tremendous. All the while, this plan helps Kentucky tobacco farmers, whose product primarily goes to smokeless products. Everybody wins.”
The report notes that Kentucky currently has the highest smoking rates and the highest rates of smoking attributable deaths in the United States. Approximately 26% of Kentucky adults smoke, which is nearly 50% higher than the national average of 17.5%. In 2016, Kentucky had 1.27 million people enrolled in Medicaid. More than half of those individuals, 638,000, or 50.1%, were current smokers. Federal and state spending for Medicaid in Kentucky in 2016 was over $9.6 billion and smoking related health problems accounted for $1.47 billion.
Reducing this burden on taxpayers is a primary motivation of Rodu and Plurphanswat’s research and proposal. The two note that Kentucky is uniquely positioned to implement a policy like this because of a law passed during the administration of Governor Fletcher recognizing that “taxing tobacco products according to relative risk is a rational tax policy and may well serve the public health goal of reducing smoking- related mortality and morbidity and lowering health care costs associated with tobacco- related disease.”
This proposal would extend that legislation to increase the excise tax on a pack of cigarettes from $0.60 to $1.10, while maintaining the current excise tax on chewing tobacco and moist snuff, as well as the existing sales tax on vaping products. Any tax increase as a result of this plan should be offset by reductions in income taxes and corporate taxes as a part of state tax reform.
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