Politifact sees excise taxes as costing jobs

posted at 1:15 pm on December 24, 2011 by Jazz Shaw

Even while more fiscally conservative plans have been producing results in red and blue states alike, (see Texas and New Jersey) an attempt to restructure the tax code in Georgia seems to have fallen flat. Gov. Nathan Deal was on track for a new plan earlier this year to, ?Broaden the tax base! Flatten the tax rates! Cut income taxes for everybody!? But it?s not going to happen. So what went wrong?

The tax reform campaign appeared to be an unstoppable juggernaut that would roll through the General Assembly and drop a bright, shiny bill on the desk of Gov. Nathan Deal for his signature.

The only problem was, reality intervened.

A major part of the tax revision proposal involved the elimination of most of the tax breaks and exemptions that had been granted over the years to various businesses and special interest groups. Corporate lobbyists quickly made it clear that they weren?t going to sit still and allow that to happen.

?We got out-lobbied,? said A.D. Frazier, the retired banker who chaired a study council that drafted the tax revision plan. ?It was as simple as that.?

So it was back to the drawing board. An alternate plan was developed which was supposed to anger less people, but would make up for lost revenue by bringing back the state sales tax on food and jack up a massive excise tax increase on cigarettes. Regular readers already know that we?ve covered the dismal results of high ?sin taxes? in the past, and tobacco and alcohol are the most common targets of excise taxes.

Well, Gov. Deal received a letter from Grover Norquist recently, warning him against such a move. It reads, in part:

?Last year?s target was tobacco; this year may be a repeat, or we may hear proposals for excise tax increases on alcohol or sweetened beverages,? Norquist wrote. ?Whatever the case may be, targeted excise tax increases drive commerce across state lines and hurt small businesses? bottom lines.?

If you followed the previous link to our coverage of previous tobacco tax hikes, Grover?s predictions should look familiar. After the news broke, Politifact took a look at Norquist?s claims to determine if they were true.

The question for us: Do excise tax increases, as Norquist wrote, ?drive commerce across state lines??

Excise taxes are placed on items such as cigarettes and alcohol. Most excise taxes are on cigarettes. Georgia, like most Southern states, has among the lowest excise taxes on cigarettes (37 cents a pack) in the nation. One news report earlier this said state Senate leaders are considering raising the cigarette tax by $1 a pack?

Our conclusion:

Norquist has a good argument for his basic point, based on the research we?ve seen and people we?ve interviewed. The difference in taxes between some places, however, is so large ($2.20 a pack between Washington, D.C., and Virginia) that it adds some important context to this argument. With that additional bit of information, we rate Norquist?s claim as Mostly True.

Politifact actually does make an important point about context. If the area affected by the excise tax is near a border with some other state, county or area where prices are significantly lower, people will be far more likely to take their business elsewhere, hurting small businesses and costing jobs. But what if there isn?t a nearby avenue to cheaper smokes and beer? As we?ve discovered in our previous coverage, that doesn?t mean people will just shut up and pay the tax. The Chicago example was the best one, where authorities found a vast increase in stores carrying bootleg cigarettes without tax stamps and customers purchasing those, buying over the internet, or just ?off the back of the truck.?

A rating of ?mostly true? might seem a little milquetoast, but at least they are facing up to the reality. You?re not going to fix your state?s budget woes by selective taxation under the guise of moderating people?s behavior through abuse of the tax code.

Source: http://hotair.com/archives/2011/12/24/politifact-sees-excise-taxes-as-costing-jobs/

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