Tobacco Taxes miss estimates

The National Center for Policy Analysis took a look at the new federal excise tax on cigarettes for the S-CHIP program. (You'll remember this as being one of the early broken promises by the Obama Administration. During the campaign, Barack Obama and Joe Biden repeated time and again that if you make less than $250,000 a year, your taxes would not increase. They lied.)

The conclusion:

Using tobacco tax increases to fund health care for low-income children is a bad idea. As the taxes imposed on tobacco products increase, revenues are likely to fall - requiring increases in other taxes. In addition, small businesses and their employees are likely to suffer, and the impact on public health is likely to be negligible, or even negative.

Mississippi was smart not to tie the tobacco tax to health care. But the cigarette tax was sold to off-set another tax, the new car sales tax, which is used to off-set the car tag tax that is too high for people. Legislators incrased taxes to off-set low tax revenues directed at hiding the pain of another tax that is too high.

That was the fight earlier this year. Now it is clear what will happen next. Last May, in its opposition to the cigarette tax increase, Citizens Against Government Waste predicted: "When the expected tobacco tax revenue fails to materialize, the politicians in Jackson will end up increasing yet more of your taxes to make up the shortfall!"

Sure enough, the Mississippi Tax Commission's July 2009 revenue numbers released earlier this month show the tobacco tax income failed to hit projections by 17.99%. Overall, tax revenue came in at almost 10% under projections. That means two things: massive cuts and legislators itching to raise taxes. Their answer will be that they didn't get the revenue they expected last year, so they have to raise more. Here are some of the biggest misses of projections versus reality in July 2009.

Sales Tax: -10.81%
Individual Income Tax: -17.66%
Tobacco Tax: -17.99%
Oil Severance Tax: -33.51%
Natural Gas Serverance Tax: -63.42%
Installment Loan Tax: -35.98%
Title Fees: -30.77%

Mississippi can not tax itself into prosperity. The answer is not higher taxes. The answer is cutting government. So as legislators begin looking at the next budget, remind them: don't raise taxes, cut spending.