Rise in cigarette tax can fix health woes

With Georgia’s budget in crisis, state legislators have explored increasingly desperate tax measures to raise money. The latest ill-conceived proposal, reinstating the state sales tax on groceries, emerged suddenly and then died just as quickly as a result of taxpayer backlash.

All the while, legislators have stubbornly ignored the most obvious revenue generator: increasing the state tax on cigarettes.

Georgia’s 37-cent state tax on a pack of cigarettes is 44th lowest in the nation. Raising the tax by $1 could generate $298 million, according to anti-smoking advocates, more than the $250 million from the grocery tax.

Gov. Sonny Perdue and lawmakers need that money to avoid inflicting serious harm to Georgia’s health-care system, especially to Atlanta’s Grady hospital and the statewide trauma network. Both need additional state financing; without it, Grady’s survival could again come into question, and the proposed expansion of the state’s trauma-care network would have to be abandoned, which could cost as many as 700 lives a year.

Revenue from an increased cigarette tax could also help resolve a serious dispute over Medicaid funding between Perdue and the state’s medical lobby.

In years past, Georgia has financed some of its contribution to Medicaid by imposing a tax on the three HMOs that service Medicaid patients. But thanks to a change in federal law, Georgia is being forced to either end that tax or apply it to all HMOs operating in the state, not just those serving Medicaid patients.

In response, Perdue proposed a modest tax on both hospitals and HMOs, but a powerful alliance of doctors, hospitals and insurers has blocked it.

Perdue had hoped to use proceeds from that tax to fund trauma care throughout the state and to raise Medicaid reimbursements, a step that would have benefited hospitals in general but especially Grady. Instead, with his tax idea all but dead, Perdue has yanked $324 million for Medicaid and trauma care from the budget, claiming he doesn’t have the state funds needed to draw matching federal funds.

To the consternation of those who blocked his tax proposal, he has also cut Medicaid reimbursement by 10 percent for hospitals and 6 percent for doctors, and is diverting more than $500 million in federal Medicaid funds to plug other holes in the budget.

Georgia stands to forfeit $1 billion in state and federal health care money by failing to match available Medicaid dollars, says the Georgia Budget and Policy Institute.

With the session ending soon, a cigarette tax is one way out of the mess. Cigarette taxes do fall hard on many Georgians who can ill afford to pay more for their daily habit, but the experience of other states suggests that raising the tax on cigarettes can also significantly cut consumption.

That’s important. Apart from the annual tragedy of 10,500 smoking-related deaths, smokers cost Georgia $2.25 billion in health care bills and $537 million in Medicaid payments. In effect, the tax increase would merely be used to offset the cost of cigarette smoking.

With the cigarette tax revenue, the Legislature could also increase reimbursements to hospitals and doctors, avoid draconian cuts at Grady and fund trauma care.

Philosophically, such an approach is no different from Perdue’s proposal to fine “super speeders” to pay for trauma care. In both proposals, those who put themselves and their health at risk would be asked to help offset the costs of that behavior.

Cigarette taxes are also apparently one tax that most taxpayers can stomach fairly easily. Polling for the Campaign for Tobacco Free Kids found that 75 percent of Georgians favor increasing the tobacco tax by $1. Support was more than 70 percent among both Democrats and Republicans, and at 63 percent among smokers.

That seems like just the political cover Perdue and other lawmakers need.

> Ken Foskett, for the editorial board (kfoskett@ajc.com).