No smoking? Coffers feel the pain

BLOOMINGTON, Minn. — Roland Henkel quit smoking in September and has been doing the math ever since: a week added to his life. More than 2,100 Marlboro Lights he hasn't smoked. And more than $400 he didn't spend on cigarettes.

"It does add up," said Henkel, 53. "You don't think about it when you're smoking so much."

The state of Minnesota has been doing the math, too, and isn't quite as delighted.

Because of quitters like Henkel, Minnesota's tobacco tax revenue is expected to go into a gradual slide later this year — a drop that may grow even steeper with the expected passage of a statewide smoking ban.

Across the country, states are putting their treasuries under pressure by adopting smoking restrictions as well as higher cigarette taxes, which appear to be discouraging people from lighting up, as many health activists had hoped would happen.

State Sen. David Tomassoni, a Democrat who opposes a statewide smoking ban, said he worries about the lost tax dollars.

"The taxes on smoking are being used to fund education, they're being used to fund health care, they're being used to fund real things. Now, if we eliminate smoking, does it mean that those things go away?" Tomassoni said.

Opponents of smoking don't mind if the take from smokers falls.

"The wonderful thing about tobacco revenues is when they go down, there's less smoking," said Eric Lindblom at the Campaign for Tobacco-Free Kids in Washington.

It is clear that states could see some medical savings from reduced smoking, but it is difficult to say how much, and whether those savings might offset the lost tax revenue. Minnesota's Department of Human Services estimates it spends $295 million a year to treat smoking-related illnesses for 647,000 people on public assistance.

The downturn in revenue won't necessarily cause states any immediate major hardship, since the decline is slow and cigarette taxes represent only a small portion of state budgets.

But up to now, they have been a reliable and politically expedient way of raising revenue to solve budget problems. Sin taxes on things such as cigarettes are "the most socially acceptable form of taxes you can raise," said Bob Kurtter, a state budget watcher at Moody's Investors Service.

Just over a fifth of U.S. adults smoked in 2005, down from about one-fourth a decade ago. Because of the downturn, states levied taxes on 2.8 billion fewer packs in 2005 than they did just five years earlier.

In 2005, tobacco taxes contributed $13 billion to state budgets. But cigarette-tax collections that year were down in 15 states compared with the year or years before, according to a study backed by the tobacco industry. States such as New York, Massachusetts and Illinois are all forecasting a drop in revenue.

Similarly, the federal cigarette tax has been bringing in less money each year since 2002. The amount dropped from $8.1 billion in 2002 to $7.7 billion in 2005, according to the same study.

Cigarette taxes are now "a lousy way to fund your government," said David Brunori, who teaches tax policy at George Washington University. "The government is not letting you smoke anywhere."