Michael Thompson on Health Care, Energy, and Cigarettes

Michael Thompson of the Thomas Jefferson Institue for Public Policy stops by the podcast to talk about the current state of conservative policy and discourse in the commonwealth. Thompson talks about how the institute started and its goals, the Reagan rule and how to ensure good policy happens, practical health care ideas and initiatives, local taxes, in particular, Richmond’s cigarette tax and its impact on consumers and the city coffers, and offshore energy exploration and production.

For some backdrop, here are a couple of recent statements from Thompson.

First, on Cigarette taxes in Richmond:

Before the
Richmond City Council
Finance and Economic Development Committee
February 15, 2018

I’m Mike Thompson, President of the Thomas Jefferson Institute for Public Policy. Six weeks ago we published an analysis of localities across the Commonwealth that have raised cigarette taxes and what we found, we hope, will be instructive to this City Council as it debates the issue.

Those supporting an $0.80 per pack tax increase mention several cities around the state that have significant cigarette taxes as a reason to go down this road. However, there are important facts that were missed:

In Alexandria, the tax is now $1.26 per pack. Its revenue from this tax was less in 2016 than in 2010 when that tax was $0.80.

In Newport News, the tax increased from $0.75 to $0.85 in Fiscal Year 2013. And yet its revenue from this tax is steadily decreasing and in 2016 was less than four years earlier.

In Norfolk, this city has increased cigarette taxes three times in the last five years. And each time the revenue begins to decrease in the second year after the tax increase.

Virginia Beach, with a tax of $0.75 per pack saw its income from this revenue source significantly less in 2016 than it was in 2010 when the tax was $0.61.

What these numbers show is that shoppers will seek out savings in often used items such as cigarettes. We learned this in our high school economics course when the term “elasticity” was used and our eyes glazed over. Higher prices encourage shoppers to seek lower priced locations.

We shop at Walmart and Kohls in order to save $5.00 on a shirt or blouse. We travel blocks out of our way to save $0.15 a gallon on gas rather than going to the station down the street. That’s a savings of $2.40 on a typical fill up.

Smokers are not stupid shoppers. To save $8.00 for a carton of cigarettes, they can easily drive out of the city, and buy their cigarettes at the local gas station, convenience store or grocery store. And they will also buy their gas and their groceries at these locations. So the City will hurt its own businesses and will lose sales taxes and BPOL taxes that it would otherwise collect.

According to the Centers for Disease Control, 26.1% of those making under $15,000 are smokers, and only 10.4% of those making over $50,000 are smokers. So the tax you are contemplating is a stiff regressive tax that hits the poor the hardest.

A cigarette tax increase is not a financially stable way to raise income or as part of a guaranteed income stream to pay for additional bonds.

On Energy:

At Richmond News Conference Regarding
Proposed Off-Shore Oil and Gas Development
February 21, 2018

2/21/2018 — “The Department of Interior’s off-shore gas and oil development plan places Virginia in a unique position to be one of its greatest beneficiaries with increased job creation, economic growth and strengthened national security.

“By developing what could be our abundant offshore resources in the Atlantic Ocean, we can fill a critical need in meeting our long-term energy needs, stabilizing energy costs and contributing to the U.S. becoming truly energy independent.

“A late January Mason-Dixon Polling & Strategies survey for us asked if Virginians support off-shore drilling if it could be done in a safe and environmentally friendly manner. The answer showed drilling was supported by a 55-39% margin. The survey further showed that every region of the state supports off-shore drilling, In the Hampton Roads area, where off-shore drilling will have the largest impact, it was supported by a 55% to 41% margin. Northern Virginia was least supportive showing 50% support with 45% in opposition (full results found on our website: www.thomasjeffersoninst.org).

“These results are encouraging for those who believe that America can become energy independent as well as a major supplier of critical energy needs for our allies in an increasingly dangerous world. And, as I said earlier, more supply should create pressure to keep our energy prices lower.”

Links of note:
Thomas Jefferson Institute

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