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By Rep. Casey Knudsen
Mont. HD 33 

Montana Viewpoint

Why I will be voting no on initiative 185

 

October 10, 2018



Ballot initiative 185, or I-185, has become quite the hot-button issue this campaign season. I-185 raises the taxes levied on all tobacco products, including raising the cigarette tax to $3.70 per pack, and raising the moist snuff tax to the greater of 83% of the wholesale price or $3.70 per 1.2 ounces. Now, right off the bat, I am not a fan of this initiative for the simple fact that it raises taxes. That fact, however, is far from the only reason I am voting NO on I-185.

If a person only reads the language for the ballot initiative, it seems very innocent; raise taxes on a select portion of the population in order to help the low-income population and veterans in our great state. One thing I want to make very clear: Not all the revenue generated from this tax increase will go toward Medicaid expansion or any programs for veterans. This is one of the most frustrating parts of the pro I-185 campaign. The backers of I-185 want everyone to think that every dollar raised by this tax increase is going to help vulnerable populations, while in reality only $2 million of the $74 million this tax increase is estimated to bring in goes toward veterans’ services. More money goes in the general fund to be spent on whatever legislators see fit than is actually spent on one of our most vulnerable populations.

Now, what about the actual cost of Medicaid expansion? Any figures quoted about I-185 are estimates, pure and simple. If the Medicaid expansion ends up costing more than the Governor’s office believes it will, or the tax does not raise as much revenue as expected, the remaining money will come from other programs or tax increases. I will explain further; if Medicaid expansion ends up costing $100 million, and this tax increase only deposits $26 million into the Medicaid expansion fund, that means the people of Montana are on the hook for the remaining $74 million.

I-185 also puts all Montanans, not just tobacco users, on the hook permanently by removing the sunset currently part of the law. A sunset forces the legislature to reevaluate a program, determining its cost-effectiveness, among other things. By removing the sunset, this program will automatically be funded every year, no matter how costly it may end up being. Medicaid expansion already costs nearly twice what was originally estimated. Do we really want a program that is extremely complicated and costly to just be automatically funded year after year, with little to no reevaluation? I hear a lot of talk about how people are frustrated that the federal government practices this fiscal irresponsibility, why would we want our state to follow suit?

Another major issue with the logic behind I-185 is the idea that people in Montana will continue to purchase tobacco locally at extremely inflated prices, instead of buying in bulk outside of the state. Many people know this as the black market effect. This initiative assumes that tobacco sales in Montana will remain at a relatively stable rate, which I disagree with whole-heartedly. I believe tobacco users in Montana will, more and more, go out of state to purchase tobacco for themselves and others, effectively creating a black market for tobacco in Montana. At the moment, tobacco taxes in Montana are relatively equal to the states surrounding us. If, however, I-185 passes, the tobacco tax in Montana will increase to between 6 and 8 times the tax of surrounding states (https://taxfoundation.org/state-cigarette-taxes/). If prices for a commodity are relatively uniform, people continue to purchase locally because it does not make fiscal sense to travel and buy somewhere cheaper. When prices are extremely disproportionate, on the other hand, it will cause people to stop buying locally and purchase out of state where the product is much less expensive. This will not only cause a drastic decrease in the estimated revenue, it will also hurt businesses in Montana as they will suffer from decreased income derived from the sale of tobacco products. This two-fold reduction in revenue will further exacerbate the over-estimation of revenue from I-185 from the Governor’s office.

Aside from the major issues listed above, there are still many more that give me great cause for concern. Increased strain on hospitals, clinics, and emergency room personnel, as well as great misdirection on the part of the backers of I-185 are just a few issues that I believe will come back to bite us.

Please, do not use the excuse “I don’t use tobacco, I’m not paying for it.” Do not be complacent. This initiative will end up costing all of us a great deal of money. Get out, vote, and don’t forget, vote NO on I-185.

Representative Casey Knudsen

 

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