Georgia’s tobacco tax: Unusually low and tough to change

After smoking on and off for more than 12 years, Atlanta native Katie Moore may have finally kicked the habit for good.

How did she do it? By moving 880 miles away, to New York, where the state tobacco tax is the highest in the country — $4.35 a pack, nearly $3 more than the national average of $1.46. In New York City, where Moore now lives, smokers pay an additional $3.10 tax on top of the state tax. In some parts of New York, a single pack of cigarettes can cost as much as $14.50.

Because of high cigarette prices, Moore said, smoking ceased to be an option when she moved to the Big Apple for her job. In fact, the 30-year-old associate financial representative admitted that the high price of cigarettes was the only reason she ditched her three-pack-a-week habit.

“If I still lived in Atlanta, I probably would have never stopped,” she said. “Cigarettes were so cheap, so the incentive to quit just wasn’t there.”

Testimony from people like Moore proves why Georgia should raise its tobacco taxes, said Sarah Balog, government relations director for the American Heart Association in Atlanta.

“Every price increase has a documented and proven effect to reduce youth and overall smoking rates,” Balog said.

According to data from the Campaign for Tobacco Free Kids, every 10 percent increase in the cost of tobacco means a drop in youth smoking rates of about 7 percent and a decrease in adult smoking rates of 4 percent. Those numbers may seem small, but in Georgia, where the tobacco tax is the 48th-lowest in the nation, and more than a dollar less than the national average, a small decrease in the number of smokers could translate into a significant decrease in state health care spending.

But efforts to raise the tobacco tax have gone nowhere during recent sessions of the Georgia General Assembly, including this year, when health advocates backed an additional tax of $1 per pack of cigarettes.

The year before, the same dollar-a-pack increase died in the Legislature after opposition by the Georgia Association of Convenience Stores. Georgia’s current tax is 37 cents per pack.

Advocates of a tobacco tax increase point to the dangers of youth smoking as a major reason to make a change. The Bump It Up a Buck coalition says that in Georgia, 95,900 high school students smoke and 22 million packs of cigarettes are bought or smoked by kids each year.

But the issue goes beyond young people. “Currently, . . . [Georgians pay] out of pocket a half a billion dollars a year for smoking-related illnesses [covered by Medicaid],” said Rep. Ron Stephens (R-Savannah), who was lead sponsor of a bill to increase tobacco taxes in 2009 and 2010. Keeping tobacco prices low forces hardworking Georgians to subsidize Medicaid costs for smoking-related illnesses, he said.

If Georgia’s tobacco tax went up by one dollar a pack, as Stephens proposed two years in a row, the state would take in $350 million more to defray these health care expenses. Though that still would fall short of the half-billion that Stephens said is needed, the current tax brings in far less — $150 million each year.

The last time the state tobacco tax was increased was in 2003, when Sonny Perdue had just taken office as governor. He signed a bill to raise the tax from 12 cents to 37 cents a pack. The change was not very big by national standards, but the state brought in an additional $100 million the following year.

In the period since then — with Perdue serving eight years in the governor’s office and Nathan Deal succeeding him in 2011 — there has been no further increase in the state tobacco tax. Efforts to get another increase through the Legislature haven’t come close to success.

A clash of political wills

Advocates of an increase point to evidence of strong public support for the idea. In a poll conducted in 2010 by Glen Bolger, a Republican strategist and co-founder of Public Opinion Strategies, 72 percent of self-identified Republicans and 76 percent of self-identified Democrats in Georgia favored a tobacco tax increase.

But the anti-tax movement is a political force to be reckoned with in Georgia, and the campaign for a tobacco tax increase has run up against it.

Stephens said many conservative legislators in Georgia shy away from his proposal for fear they will be labeled “tax increasers” and lose their seats. In an especially trying economic climate, legislators see supporting any tax increase as risky, even if the majority of citizens support it, he said.

Stephens also said that a prominent anti-tax political think tank, Americans for Tax Reform, has kept some Georgia representatives from sponsoring the tobacco tax by promoting a “no new tax” pledge. Once legislators sign the pledge, they must stick to their word and oppose all new tax proposals or jeopardize their reputations as being truly “anti-tax,” said Stephens.

But Joshua Culling, Georgia’s state affairs manager for Americans for Tax Reform, said Stephens’ perspective is the one that is shortsighted. Raising the tobacco tax is not the solution to Georgia’s problems, Culling said. A total reform of the current health care system is what is really needed, he said, and until that happens, a tax increase will only hurt the economy.

“Raising taxes to cover health care costs suggests that the system is OK and that there’s just not enough money currently to sustain it,” he said. “But it’s a broken system that needs to be addressed, and until our legislators understand that point, we’ll never fix the problem.”

Culling said raising the tobacco tax would put on an unfair burden on a small segment of the population to solve a statewide problem, which is why so many legislators oppose the idea.

In 2012, roughly 23 percent of Georgia’s state senators and 20 percent of its state House members, the majority of whom are Republicans, have taken the anti-tax pledge — including key leaders such as House Speaker David Ralston. Governor Deal, a Republican, has also taken the pledge.

Not all Republicans in Georgia oppose a tobacco tax increase. Three of the five co-sponsors on tobacco tax legislation are conservative Republicans. These sponsors understood the long-term financial benefits to Georgia taxpayers of increasing tobacco prices, said Rep. Mary Margaret Oliver of Decatur, one of the two Democratic co-sponsors of the bill.

“Bottom line, we should not be encouraging people to smoke tobacco, because our taxpayers have to spend more money on smoking-related illnesses,” she said.

Oliver applauds Stephens, the most high-profile GOP advocate of the tobacco tax, for taking “a real economic view” on taxpayer dollars, even if it’s an unpopular stance among some Georgia legislators.

“State representatives cannot avoid issues of preventive health care,” she said, “and [Rep. Stephens] as a pharmacist and someone who works in the health care profession, understands the potential financial and health benefits of raising tobacco prices, even if that means supporting a tax.”

Gov. Deal has said that raising the tobacco tax would harm convenience stores near the border with other states.

Unable to make any headway with the governor and legislative leaders, Stephens has temporarily shelved his campaign to increase the tobacco tax.

“There is no need to waste my energy and the energy of other representatives if leadership support isn’t there,” said Stephens. “It’s going to take a shift in mindset, and an understanding that we are subsidizing Medicaid on behalf of the working public. Until that point is made, no one will touch it.”

What about retailers?

Some blame the prevailing attitudes in the Legislature on Big Tobacco.

The millions of dollars given each year to the Republican National Committee by tobacco companies keep Georgia Republicans from cutting ties and implementing a harsher tax, said Eric Bailey, Georgia grassroots advocacy manager for the American Cancer Society.

But for tobacco-tax opponent Jim Tudor, president of the Georgia Association of Convenience Stores, it’s not a matter of loyalty to tobacco companies. It’s all about loyalty to small retailers.

“Legislators are well-meaning people, but they are not retailers and they don’t have to compete with other stores,” Tudor said.

Raising the tobacco tax by a dollar may drive Georgians living in border counties to cross state lines to stores where cigarettes would then be about 20 cents cheaper, he said.

“It’s a pennies business, and we can’t afford to lose any business for reasons of tax policy,” Tudor said. “This may not affect states without a large border population, but that’s certainly the case in Georgia, and it will hurt small businesses.”

Culling agrees with Tudor, calling the tobacco tax an “unstable” method to raise revenue because of cross-border sales.

Convenience stores rely on tobacco sales for a third of their yearly profit, so a tax increase that helps competitors will certainly hurt Georgia’s small business owners and the economy, he said.

Culling also cited an ATR-funded study that found Georgia’s cigarette sales increased by nearly 1.3 million packs six months after South Carolina raised its excise
tax rate in July 2010.

But Balog said Culling’s and Tudor’s argument doesn’t hold up.

“This fear of cross-border sales is the biggest boogeyman in the argument against raising the tobacco tax,” she said. “The idea that someone is going to drive across the border to save pennies on cigarettes when the gasoline prices are so high just doesn’t make sense.”

Evidence from four neighboring states – South Carolina, Tennessee, Alabama and Florida – shows that sales in counties that border Georgia have not taken a hit even though their tobacco prices currently exceed those in Georgia, Bailey said. A report from the economic consulting firm Orzechowski and Walker illustrates that Georgia’s tobacco tax revenue actually declined 5 percent after Florida raised its tax by $1 in 2009 to match the national average, he said. At the same time, Florida saw a 193% increase in revenue, collecting $1.2 billion in 2010 versus $429 million in 2009.

Advocates for the tax in Georgia are not giving up despite recent setbacks.

Raising the tobacco tax, and hopefully encouraging some people to stop smoking, will not only benefit the state financially but also help its image, Balog said.

“Georgia is known for so many things – great golf, sports, music, food, beaches,” said Balog. “Do we really want to make cheap cigarettes and high incidence of smoking-related illnesses one of them? I don’t think so.”

This article is the latest in a series developed by the Public Health News Bureau, a project funded by Healthcare Georgia Foundation. The bureau is staffed by graduate students from the Health and Medical Journalism Graduate Program of the University of Georgia’s Grady College of Journalism and Mass Communication.

Robyn Abree earned her undergraduate degree in journalism and master’s in health and medical journalism at UGA’s Grady College.