BALTIMORE – For three-quarters of a century, Democrats have advocated liberal economic policies. But a radical shift appears under way. In an attempt to reform their soak-the-rich image, Democrats are casting their ideological heritage by the wayside. Don’t believe me? Just ask the poor.
Lost among the wreckage of the State Children’s Health Insurance Plan (SCHIP) kerfuffle — the attempt by congressional Democrats to transform an excellent health safety net for tots into a colossal government entitlement — was the proposed 61-cent-per-pack cigarette tax hike to pay for their plan.
New cigarette taxes always receive applause: Who could be against discouraging unhealthy behavior and increasing children’s health insurance all at once? Old-style Democrats from the party of the “little guy,” for starters.
According to the American Heart Association (AHA), smoking is highest among those on the bottom rung of the educational latter. As of 2004, nearly 40 percent of Americans with a GED smoke, while only 8 percent of college-educated adults smoke.
Certain minorities also smoke much more than the average population. Thirty-seven percent of American Indian and Alaskan Native men, for instance, compared with 23 percent of all American men.
To top it all off, the poor are significantly more likely to smoke. Among different incomes, the AHA claims, smoking is “highest among persons living below the poverty level (29.1 percent).” Nearly half of all smokers live below 200 percent of the Federal Poverty Line and thus are the very families SCHIP purports to help.
The Heritage Foundation, a conservative think tank in Washington, estimated that 22.4 million new smokers by 2017 are necessary to pay for the $35 billion increase in SCHIP.
Unfortunately, SCHIP funding is not an isolated incident. Witness Maryland Democrats, led by Gov. Martin O’Malley, who in a recent midnight session passed a $1.3 billion tax increase.
In addition to new large business, small business and car titling taxes, the bill raised the state sales tax, taxes on computer services and of course, the miracle elixir: cigarette taxes ($1 per pack). Perhaps most importantly, the legislature approved a referendum proposing legalization of slot machines to help raise state revenues. Who could be against raising revenue with entertainment?
Statistics show that gambling greatly and disproportionately hurts the poor and the common good. According to a Harvard-published study, gambling acts as a regressive tax that makes “poor people poorer,” since lower socioeconomic levels gamble a greater proportion of their income than the wealthy. Anyone who has lived in a poor neighborhood knows they are specifically targeted by lottery advertisements.
Serious studies on problem gamblers show massive costs upon families, employers and the judicial system. The Gambling Impact and Behavior Study at the University of Chicago, for instance, measured the economic impact of such gambling habits on divorce, physical and mental health, lost jobs, bankruptcy and incarceration — all of which are associated with gambling problems. The results are not pretty. As statistics from the late 1990s show, “Average annual costs per pathological gambler are about $1,200 per year. … ‘Lifetime’ costs are estimated at $10,550.” The tab totals $5 billion every year.
There may be good reason to allow gambling in a free society; but state-sponsored promotion of an often-harmful activity, in the name of raising state revenues, makes as much economic and moral sense as taxing the poor to pay for poor children’s health insurance. Further, like cigarette taxes, such policies put the state in the awkward position of needing to increase such vice to increase funds.
OK, OK. Democrats are not really abandoning their soak-the-rich mentality. In the same amazing session lasting until 2:30 a.m., Maryland Democrats raised the state income tax on higher-income families too.
O’Malley says he crafted his proposal, in part, to make Maryland’s tax system more progressive, originally claiming that 83 percent of Marylanders would pay fewer taxes. He later admitted, however, that under the new law, only 45 percent will see no tax increase or pay less.
The governor’s fuzzy math fails to understand the disproportionate impact regressive taxes place upon our poor. In the case of gambling, let’s hope Marylanders do understand.
Logan Paul Gage is a policy analyst with the Discovery Institute in Washington.