Powerful Governor Stands His Ground, Again, on Food Tax

1. Powerful Governor Stands His Ground, Again, on Food Tax By ADAM NOSSITER Published: March 7, 2007 http://www.nytimes.com/2007/03/07/us/07groceries.html?ex=1173934800&en=62f3f8f928720d00&ei=5070&emc=eta1

2. Mississippi Taxes • JACKSON, Miss., March 1 — The shoppers at the no-frills Brookshire’s supermarket — plate lunches $4.49, food stamps gladly accepted — have no doubt: swapping the nation’s highest state grocery tax for one of its lowest cigarette taxes is an excellent idea, and fie on the governor who opposes it. • “Oh, yeah, no doubt about it, they need to put it off the food,” said Reggie Funchess, a worker at the BASF plant. “It’s something that will help the people. Politicians, they must have a treasure chest somewhere.” • Up at the stately domed Mississippi Capitol, Gov. Haley Barbour, a former tobacco lobbyist, has other ideas. Studies, polls, protests at the Capitol, legislative sentiment and America’s highest cardiovascular disease rate notwithstanding, the governor of the poorest state is not budging, for the second year in a row: no cut in the 7 percent grocery tax and no increase in the 18-cents-a-pack third-lowest-in-the-nation, cigarette tax.

3. The Politics • Basking at home in the reflection of his national image as the post-Hurricane Katrina success story among governors, having last week scored a giant automobile plant for his state and considered a shoo-in for re-election this year, Mr. Barbour faces few opponents, legislators say. He pushed through the Legislature hundreds of millions in subsidies for the plant, for Toyota S.U.V.s, three days after announcing it. • Mr. Barbour, the lawmakers say, is getting used to getting his way and is likely to do so on the doomed groceries-for-cigarettes tax swap. • And so it is that a bill to increase the cigarette tax to $1 a pack and cut the grocery tax in half overwhelmingly passed in the Mississippi House last month, remains bottled up in the State Senate Finance Committee, which is friendly to Mr. Barbour. Other poor states — Arkansas, South Carolina and Utah — have moved to cut their sales taxes on groceries. Not Mississippi.

4. No new taxes! • The governor’s aides and allies say Mr. Barbour is simply sticking to his no-new-taxes promise. “The governor ran four years ago on, ‘I’m not going to raise anybody’s taxes,’ and he hasn’t,” Mr. Robertson said. • But others, including health officials, say the dichotomy is false. The governor’s no-tax pledge, they insist, is at odds with the public good, since most studies show that increasing the cost of cigarettes sharply diminishes the number of smokers. • “We have the worst health indices in almost every category of any state in the country,” said Dr. J. Edward Hill, the immediate past president of the American Medical Association and a physician in Tupelo. “Reducing the percentage of citizens who smoke and increasing funding from cigarettes would have tremendous advantages.” • Dr. Hill said the issue had become entangled in political ideology. “It’s political so-called principle — ‘I’m never going to raise taxes on anything’ — which is actually also relatively stupid,” Dr. Hill said.

5. Cigarettes v. Groceries • Mississippi is the fourth-highest state in deaths attributed to smoking. And it is one of three states that give no grocery-tax break to lower-income families, according to a study by the John C. Stennis Institute of Government at the Mississippi State University. • In the Brookshire’s parking lot, in working-class southern Jackson, shoppers toting their few bags had no trouble coming up with uses for the extra hundreds of dollars from a tax cut. Most of the buying around here is done on the first of the month — payday, explained a store official, and expenditures are made frugally. • “My children’s needs, household stuff,” said Shameka Bouie, a mother of four whose truck driver cigarette-smoking husband is “always complaining” that his habit is more expensive outside Mississippi. • Howard McBound, a police officer with the Veterans Affairs Department, said: “Groceries are what we live on. My light bill is going up. My gas bill is going up. You can raise the price of cigarettes, people will still smoke.” • Even some conservative Republicans disagree with Mr. Barbour. “The cigarette tax and the grocery tax are both public health issues,” said one, State Senator Alan Nunnelee. And the tax on groceries, Mr. Nunnelee said, “is just the most cruel tax any government can impose.”

6. The Economics • How elastic is cigarette demand to taxes? • Depends on level of addiction. • Some of my recent research shows that it depends on how long people have smoked. • I recently have worked with a database that allows me to estimate excise tax elasticity. • I have 4 different measures of addiction.

7. Addiction and Elasticity Average elasticity may be small. But it may be LARGER for some smokers. • years smoked; • ease of quitting; • depression after stopping; • nicotine withdrawal.