Prop 203 may not be able to raise enough revenue

Posted on November 06, 2006 | Type: Op-Ed | Author: Arwynn Mattix
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Sometimes the devil really is in the details. This is the case with Proposition 203.

Funding childcare programs through increased tobacco taxes will drain money from other programs, including millions of dollars from health services for the medically needy and indigent.

In Arizona cigarettes cost about $4.30 a pack - $1.18 of that is tax. Those funds go toward the Medically Needy Account, the Health Education Account, the Emergency Health Services Account, and the state's General Fund. 

Because "sin" taxes like those on alcohol and tobacco are intended to reduce use of the items they tax, tacking on an additional 80 cents will encourage some smokers to quit and discourage would-be smokers from picking up the habit. The resulting decrease in tobacco sales will affect existing programs that rely on those funds. 

If voters approve this tax hike, the state stands to lose up to $13 million in tobacco revenue for existing programs in 2007 and $22 million in 2008, according to estimates by the Joint Legislative Budget Committee. Almost $5 million of that would have been deposited in the General Fund. 

That likely puts Prop. 203 in violation of a ballot measure voters approved in 2004, according to the Arizona Tax Research Association. That referendum required ballot measures to provide an independent source of funding sufficient to cover the spending without affecting General Fund revenue. Any decrease in tobacco sales will affect General Fund revenue and may therefore violate the 2004 constitutional amendment.

Arwynn Mattix is a Research Assisstant with the Goldwater Institute

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