USD Professor notes error in smoking ballot measure and explanation, won’t bring in anticipated revenue.

There’s an interesting story that just came out noting a USD Economic professor discovered errors in the fiscal note for the tobacco measure, as well as in the explanation itself, as he explains how its not going to bring in the kind of revenue that the promoters of the measure promise.

After attempting to solve the problem himself for three hours, Letellier and Mike Allgrunn, the dean of the economics department, determined the numbers were inaccurate.

The ballot measure will increase the tax on a pack of cigarettes from a $1.53 to $2.53. Taxes would also be increased on wholesale products, such as chewing tobacco and cigars, with an increase from a 35 percent rate to a 55 percent tax. With this increase in taxes, the state is hoping to bring in  25 million dollars in tax revenue.

and…

“Their assumptions will probably not bring in anywhere near $20 million because they are assuming people will not change their behavior by raising taxes,” Letellier said. “They are assuming they will still be getting all this revenue, the same amount of revenue that they got the last time they raised the taxes on cigarettes.”

and…

“It becomes really challenging when (voters) can’t be confident in the system if the person who is administrating can’t give the right numbers,” Hellwege said. “And what’s worse is that they may carry this negative attitude with them for the rest of their life. We know voting is a habit, and if you don’t develop that habit early on you may never become a regular voter.”

Read it all here.

And that’s not good. So… how exactly does one fix that kind of thing?

15 Replies to “USD Professor notes error in smoking ballot measure and explanation, won’t bring in anticipated revenue.”

  1. Anonymous

    Or they are the Phillip’s Morris payroll along with Glodt? $1.53 tax today raises $55 million. Even a USD prof can figure $1 a pack today is worth $36 million absent a decline in demand. So $25 million sounds about right?

    Reply
    1. duggersd

      “absent a declilne” Not sure if this is what Anon is saying, but the prof does point out that the income is ONLY if people do not change their buying habits. I suspect people will change their habits.

      Reply
  2. Springer

    Someone please tell me why all of a sudden tech schools are so short of funds that we need a new tax. I asked the people at the Vote No booth at the state Fair and never did get a good answer. Other than of course nothing is ever enough when it comes to schools.

    Vote NO!

    Reply
    1. Anonymous

      They don’t need it. The requested fund BY the tech schools was < $5M. To top it off, the money isn't even regulated after it's in. Steve Westra gave an excellent presentation on this and I kept wondering "how does this benefit the Dems or outsiders who must be pushing this?" Imagine my surprise when i found out the sponsor! I still don't get it…

      Reply
  3. Anonymous

    Mickelson knows this – he’s always said $25 million for this reason. The Legislative Research Council fiscal staff screwed this up by not accounting for decreasing demand and their estimate is the one that goes on the ballot.

    Reply
  4. a friend of education

    Vote how you want, but enacting this policy would almost certainly bring in less than 20 million. Raising taxes will hurt numerous SD businesses & business owners. If we increase the tax as proposed, a few people will smoke less tobacco & some money will (probably) go to technical schools. I’m all for technical education & I’m no fan of cigarette smoking. But $20 million is unrealistic & $25 million is a pipe dream. The underlying economics just don’t work.

    Reply
  5. Anonymous

    It’s dumb. If SD’s cigarette tax goes to $2.53/pack, people in Minnesota won’t bother to buy butts here anymore. They are already at $2.83 so saving $3/carton might not be enough to justify the travel.
    But South Dakota residents will have a greater reason to drive to Nebraska ($0.64/pack), Wyoming ($0.60/pack), or North Dakota ($0.44/pack)
    And as long as they are in Omaha, Gillette, or Bismarck they might as well go out to dinner, buy gas, and do other shopping.

    Reply
  6. Anonymous

    It’s called price elasticity. There’s a point at which raising taxes results in decreased government revenue.

    We’ve reached or exceeded that point. The teacher tax could be a case study.

    STOP raising taxes!

    Reply
  7. the forgotten workforce?

    This measure is also a slap in the face to our regental system. The rate of return on a tech school certificate is already higher than a four year degree, so why do those students need tuition relief? A tech school grad gets a $80,000 to $100,000 per year job right out of school with significantly less student loan debt. Many four year degrees have a post school starting degree much less than that with more than twice the debt. Of groups who should benefit from more state aid, tech schools would be at the bottom of the list.

    Reply

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