State revenue projection goes up in smoke
February 25, 2010 · 4:46 PM
I recently heard and interesting fact on the radio as I drove my son to school: Washington state legislators project and additional $860 million in revenue over the next two years by increasing the tax on cigarettes by $1 per pack. This got us discussing the math involved. I am a big believer in using practical, real-world math to help my son analyze the kind of political and PR-driven factoids that spew forth from the media.
If this is a two-year projection, then in one year we would generate $430 million in taxes. According to the Office of Financial Management (OFM), the population was 5,894,413 after the 2000 census and the official estimate for 2009 is 6,668,200.
OFM numbers showed 76.4 percent of the population was 18 or older in 2000. One can assume the same percentage for 2009. So that makes a population of 5,094,504 people who might smoke.
Then I wondered what the percentage of people who actually do smoke and later found a report from the State Department of Health showing that the smoking rate in Washington is 15.3 percent in 2009 (down from 16.5 percent). If we assume this is constant, even though the facts show it is declining, we have a total population of smokers of 779,459 people. The Department of Health estimates 770,000 smokers in the state so my math isn’t half bad.
Now, we go back to the state’s projections for revenue. At a buck a pack, the math is pretty easy to figure out. These 779,459 smokers will need to buy 590 packs of cigarettes each per year. That pencils out to about 1.6 packs per day. Is that possible, I guess so. Is it realistic? I think not.
The smoking rate is declining. Population of heavy smokers is declining for two reasons: they are dying and our educational levels are rising. Statistically, there is a direct correlation between the level of education and smoking. Finally, the places one can smoke continues to decline. Fewer people smoking, less opportunity to smoke, less disposable income and higher prices/costs.
I support the cigarette tax as a revenue stream. And all the other so-called sin taxes including booze, soda and candy. But I’m not buying what state lawmakers are selling.