Gov. Frank O'Bannon's cigarette tax proposal may be a viable solution to reduce cuts in education spending, but the math seems flawed. O'Bannon has threatened to levy a cigarette tax on more than one occasion to compensate for financial shortcomings elsewhere in the state budget, especially in education. One estimate has the cigarette tax and other tax increases creating an extra $382 million a year in revenue. While a figure like that would definitely protect Indiana education, how do we know that the money will be there?
The state has good intentions, as this price hike will deter smokers young and old (or at least slow them down). The $382 million would go a long way toward keeping the education budget safe from further cuts. But what happens when smokers quit after seeing what the price hike does to their wallets? One would think that fewer smokers would make for less revenue.
Where will O'Bannon find the money then? For starters, he may look to tax riverboat casinos, capitalizing on yet another Hoosier vice. His riverboat casino tax plan, in addition to the cigarette tax, would create an estimated $512 million in new revenue over the next 18 months.
Again, though, we run into the problem of higher prices being a deterrent and the revenue not so guaranteed. O'Bannon's heart is in the right place; it's just too bad the money may not be.