The Tax Swap Scam
by Paul Gallo

It seems to be an endless parade of caring people and politicians pushing the tax swap scam. The Communities for a Clean Bill of Health has another news release with the redundant headline of “The Facts on Why Mississippi Needs a $1.00 Per Pack Cigarette Tax Increase”. Most of these groups puff out second hand statistics like unfiltered Camels.

The first so-called fact as stated by the group- “Only at a $1.00 increase would we reap the maximum health and financial benefits of a cigarette tax”. Really? I’ve talked to mayors, economic wizards, business folks and legislators. All of them worry about the ultimate consequences of legislation without foundation. It’s a bit disturbing to realize we have politicians who are willing to make these kinds of major economic decision with little or no verifiable data. Every single mayor I’ve interviewed on the show has voiced serious concerns as related to their city’s future budgets. By the way, most of them confessed a lack of trust in future state legislatures guaranteeing the “make whole” check would be in the mail. One mayor even suggested that they just come and get the keys to his city now if tax swap scam became law.

As for the health benefits praised by the group, Mississippi has a way of avoiding national healthy trends. Let’s not even talk about the tax greedy democrats in Washington who are already sending up smoke signals about raising the tobacco tax at the federal level; one of many being proposed to fund more entitlements. When cigarettes hit triple or more the current price, Mississippians will do one of several things; the last might be to quit smoking. They’ll go across state lines to buy their cigarettes, gas, groceries and lottery tickets. They’ll sit in the comfort of their homes on the computer and order from smokemcheap.com. They’ll cut out something else on the grocery list and still buy tobacco because some people won’t be able to kick the habit. This may come as a shock to liberals who think the government can solve every problem by taxing it to death. Another option will be for the Choctaws to take advantage of a wonderful opportunity. The Choctaw Indians have several parcels of land to establish consumer outlets, and enough money to put up a nice tobacco website for on-line ordering. I’ve been told they could buy several million dollars worth at a time from South Carolina at a tax rate of seven cents per pack and make a killing in Mississippi.

Fact two was something about the tax swap having strong bipartisan support in the legislature and the public. As you have been informed more than once, those two bills were vetoed by Governor Barbour (who once worked as a tobacco lobbyist). “Strong” would mean that the governor’s veto could have been easily overridden. More loosely defined facts presented were that a study by the Stennis Institute of Government found revenues to municipalities would increase by $18 to $36 million due to consumers spending their overwhelming savings from the tax cut. Sometimes I wonder if they pick these numbers from a spinning wheel. “ Hey Marty, the wheel stopped on $12 to $15 million. Wanta spin again and kick it up? I think it would sound better if the number was bit higher. Don’t you?”

I had Dr. Marty Wiseman of the Stennis Institute on the program about the research. To be perfectly honest, by the time the interview was over Dr. Wiseman was between 82 and 99% confused. We even had the “numbers lady” on with him and it was all statistical guessing.. “Wait a minute!” I said. “You want to change something as critical as the tax structure at a time when struggling cities on the coast and in the rural areas are barely making ends meet? And you want to do that by just estimating actual losses from grocery sales?” By the way, the answer was “Yes”.

I try and tell folks who will listen that it’s really simple. Some people what to further their political agenda by pushing the “Tax Swap Scam”. Let me ask you something. Would you support legislation that gives you a tax return of 50 cents in the right pocket and takes $4.50 from the left pocket? Well of course not. (Those figures come from my own non-government funded research). What the team of Eaves and Franks won’t tell you is that your grocery savings would be minimal at best. It’s not like you’re going to be able to take that Italian vacation you’ve been dreaming about.

Let’s say you fill your grocery cart with $100.00 worth of stuff that you normally purchase. Granted $100.00 is not going to even come close to “filling” a grocery cart. But with the proposed 4-½ cents new lower tax rate, you’ve just hit the jackpot by saving $4.50! Wait a minute! Only perishable items qualify, basically the same groceries that qualify on food stamps. Now from the same research I’ve done with callers across the state, only about half of what you normally buy would qualify for the lower tax rate. The rest, stuff like paper towels, cleaning items, toilet paper and bicycles, if you’re at Wal-Mart during Christmas, would still be taxed at 7%. So, taking a conservative 50% number, that means you’ve just saved $2.25 on $100.00 worth of groceries. Wow! $2.25 savings and you hear some politicians say that would make the difference for a really poor family. The truth is a larger percentage of poor people smoke, so the meager savings may not even cover the increase in one pack of cigarettes. As for the emotional line used, “We should do this for the poorest of the poor in Mississippi”; somebody needs to inform these caring individuals that the really poor are receiving food stamps. The last time I checked, our annual cost of feeding the poor in Mississippi totaled over $401,000,000.00! That’s right, $401 million dollars per year.

Smaller communities in our state live or die on sales taxes to fund everything from fire to police to pothole repair. Many of these towns have a total number of businesses you can count on one hand. If they are lucky, one will be a grocery store. Cutting sales tax revenue from grocery sales in half or more means they had better get a check in the mail from the state of Mississippi or they’ll have to make it up fast by raising taxes locally.

Now to prove this legislation is bad in more ways than one, let’s just say the smoking cessation program cut cigarette sales in half. What happens to the increase in tobacco taxes needed to guarantee every city’s shortfall? Ummm? Somewhere down the line, you can count on your PROPERTY TAX and/or CAR TAGS costing you a lot more than the savings of $2.25 on $100.00 worth of groceries. We don’t really need a Stennis Institute study to tell us that, we have the Mississippi history books.

What should be done is simply to forget about messing with the sales tax on groceries until it really makes sense financially, not politically. We should also raise the state’s taxes on all tobacco products to be competitive with surrounding states. The 2007 report shows that Arkansas charges 59 cents per pack, Alabama-42.5 cents, Louisisana-36 cents, and Tennessee- 20 cents. A Mississippi increase of $1.00 per pack on taxes immediately would mean an 82 cent increase. Most folks I’ve talked with agree we need a reasonable increase in tobacco taxes. The problem is that most politicians want to snuff out their competition more than cigarettes. But then again, we would expect nothing less than that during an election year. Like Mike Moore is fond of saying— “Smok’em if you got’em”!

Opinion Piece by Paul Gallo
SuperTalk Mississippi
10/16/7