Des Moines Register, February 22, 2007

Gov. Chet Culver has proposed raising the cigarette tax by $1 a pack, from 36 cents to $1.36. Proponents say that would discourage smoking while raising an estimated $135 million to expand health-care programs. Opponents say it’s a regressive tax that would unfairly burden the poor and would hurt businesses in border communities if a neighboring state’s tax is lower.

One bill introduced in the Legislature would raise the tax by a lesser amount — 64 cents, to $1. Various bills would direct the money to different places, such as expanding Hawk-I and Medicaid for low-income Iowans or funding the Senior Living Trust, which provides long-term care alternatives for the elderly.

YES: Discourage smoking and improve health

In recent weeks, members of the Iowa Legislature have engaged in discussion about various strategies to tackle rising health-care costs and to expand access to affordable health-care coverage. It's a complex problem with many possible solutions, but one fact is undeniable: Rising costs are directly related to the health behaviors of Iowans.

There is no longer any doubt smoking is one health behavior adding to the growing cost of health care. It's the leading cause of preventable death for smokers and non-smokers. The added health-care costs associated with smoking are passed on to the government, health insurers, employers and eventually, disproportionately to nonsmokers. The Principal Financial Group supports adding $1 to the state tax on tobacco products to lower the financial impact of smoking and to fund expanded access to health-insurance coverage.

Currently, 20 percent of Iowans smoke. According to the Iowa Department of Public Health, tobacco use increases health-care expenditures by $617 million annually. While tobacco taxes generate $85 million per year for Iowa's general fund, the state's Medicaid program spends approximately $277 million annually treating tobacco-related illnesses.

Smoking often begins as a habit, but grows into a powerful addiction. Tools such as tax increases can break this cycle. Research has proven higher-priced tobacco discourages first-time smokers from lighting up and encourages current smokers to quit. According to the Campaign for Tobacco-Free Kids, a $1-per-pack increase would result in nearly 21,000 young Iowans quitting smoking.

Iowa's current 36-cent-per-pack cigarette tax is dated and not in alignment with the average non-tobacco-producing state. By better aligning our tobacco tax with other states, we will make an impact. The Principal Financial Group endorses a $1 increase, as proposed by Gov. Chet Culver, for the specific purpose of improving the health of Iowans. We believe revenue raised by the tobacco tax should be allocated toward reducing smoking-related health costs and expanding access to health-care coverage for children and adults at or near the poverty level.

By making it more expensive to purchase tobacco products, we will take a significant step toward improving the health of Iowans. Dollars spent today on smoking-related illnesses may someday instead contribute toward a healthier future for the citizens of our state. As a concerned employer and community member, we support and encourage our legislators to pass this into law and to continue promoting healthy lifestyle choices.

BARRY GRISWELL is chairman and CEO of Principal Financial Group, and JOHN ASCHENBRENNER is president of Insurance and Financial Services for Principal.

NO: Don’t prey on poor to fund government

While it’s necessary for Iowa to tax in order to fund government operations, the state should not tax anyone for the benefit of third parties. Yet, that’s exactly what the proposed $1-a-pack cigarette tax hike would do.

Health care in the United States is the most wasteful among all developed nations. Americans spend more for health care than do other developed nations and have lower life expectancy. Throwing tobacco-tax money at this problem won’t fix it and in fact may encourage more waste. In addition, Iowa’s current proposal doesn’t even guarantee that smokers will get better health care. The funds will also be spent on overeaters, overdrinkers and a whole host of people engaging in other risky behaviors. Why should they get a free pass?

Supporters of the $1 tax claim that smoking is breaking the health-care system. “Not so,” says the Congressional Research Service. Its investigation revealed that smokers’ external costs were only 33 cents a pack and that higher estimates made by antismoking groups were flawed. According to these reports, “Smoking has apparently brought financial gain to both federal and state governments, especially when tobacco taxes are taken into account.”

Iowa’s smokers already pay a 36-cent state and 39-cent federal excise tax, in addition to approximately 50 cents into the tobacco-settlement fund. They pay a 6 percent sales tax on top of all that, making cigarettes the highest-taxed product in Iowa.

Studies by the National Taxpayers Union have concluded that “those making less than $30,000 per year shoulder 60 percent of the burden of tobacco taxes, while those making over $100,000 per year bear just 1-2 percent.” As much as tax proponents try to spin it otherwise, the tobacco tax is regressive. It targets lower-income people by trying to tax them into healthier behavior. That’s not a tax; it’s a fine.

Do higher taxes reduce smoking? Not according to a 2006 report by the Pacific Research Institute. It pointed out that nationally, despite tax hikes, adult and teen smoking rates were not down any more than would be expected, based on smoking trends since the 1960s. If prices affected teen smoking, it would have all but disappeared by now.

While it may be enticing to force a politically unpopular group to fund Iowa’s health-care system, other states have found that cigarette-tax hikes fail to fix any of the problems they are meant to address. Indeed, last November, California and Missouri voters overwhelmingly rejected proposed cigarette-tax hikes. Let’s hope the Iowa Legislature is equally wise.

DAVID W. KUNEMAN of St. Louis, a research pharmaceutical chemist, is the noncompensated director of research of the Smokers’ Club Inc., a nonprofit organization that does not receive funding from tobacco companies.