Study sees big gains from tobacco tax hike

A financial analysis on raising Georgia’s cigarette tax shows a much higher revenue return than previously estimated.

Cigarette Burning

Experts had projected that a proposed $1.25 increase in the state tax on a pack of cigarettes would raise $350 million a year.

But a fiscal note, requested by state Sen. Chuck Hufstetler (R-Rome), estimates that the increase in tax revenue would be $561 million to $585 million in fiscal 2016. The total includes an increase in the tax on smokeless and loose tobacco as well.

The projection, from Georgia State University’s Fiscal Research Center, is based on raising the tax from the current 37 cents per pack – the third-lowest levy in the nation – to $1.60.

The revenue boost would decline slightly on an annual basis through fiscal 2020, when the estimated amount would be $461 million to $554 million. 

Andy Lord, a health care lobbyist who this week pushed the higher cigarette tax in a House hearing on funding a transportation bill, said Friday that he was not surprised by the number “based on usage rates in Georgia.”

Tobacco use –– the single most preventable cause of disease, disability, and death in the U.S. –– causes more than 11,000 deaths in the state annually, and its direct health care costs amount to more than $3 billion a year.

Roughly 1 in 5 Georgia adults are smokers.

Lord, who represents the Georgia Society of Clinical Oncology, said the extra money could be used for state needs other than transportation. He mentioned having the state use the funds to revive the Medicaid pay raise for primary care physicians, which ended Jan. 1.

Healthcare Cost

The Affordable Care Act awarded primary care doctors treating Medicaid patients a pay increase. It was funded entirely with federal money, and pushed their Medicaid pay to the level of Medicare reimbursement. But it lasted only two years, and now that it has expired, states are facing the issue of whether to continue it with their own funds.

Lord said he believes the legislative climate in Georgia is good for supporting a higher tobacco levy.

“This is a much cleaner, much simpler approach to addressing these funding issues,’’ Lord said, noting that a $1.60 level would put Georgia’s cigarette tax into the average range for state levies.

Cindy Zeldin of Georgians for a Healthy Future added Friday that raising the tax “is a strong, reliable, large source of money that’s clearly needed right now.”

She also mentioned that besides funding the doctor pay raise, it also could be used to help shore up Georgia’s struggling rural hospitals.

Studies have shown that increasing this tax leads to lower consumption of cigarettes.

June Deen of the American Lung Association in Georgia told GHN recently that the increased levy “just makes sense.”

“It also just makes sense to take a more well-rounded look at revenues,’’ Deen said. “When you do, the most reasonable place to look is at our abysmally low cigarette tax.”

A higher tax, she said, is a “real boost to reducing tobacco use, both in kids and in adults who are looking to quit.”

Some legislators have shown interest in a tobacco tax increase this year, though anti-tax activism remains a political force in the state.