Montanans will decide the fate of Initiative 185 when they vote this November.  The ballot measure is needed, proponents say, because it will finally accomplish the most noble, yet elusive, of goals: reducing smoking and raising revenue for the expansion of Medicaid in Montana, so that thousands more can realize the benefits of healthcare.  It would raise the cigarette tax by $2 per pack; raise taxes on moist snuff by the greater of 83 percent of the wholesale price or $3.70 per 1.2 ounces; and raise taxes by 33 percent on vaping products.  The proceeds, it is claimed, would fund Medicaid expansion past its current June 30, 2019 sunset date.

Medicaid is a flawed government program that was intended to provide health coverage to the truly needy.  Under the Affordable Care Act (ACA), it has been significantly expanded in many states, including Montana in 2015.  When the program was expanded in Montana, it included a sunset provision to ensure that costs were controlled and the program was maximally effective.  Initiative 185 seeks to bypass the legislature’s oversight process and permanently expand Medicaid—with not enough revenue to pay for it.  It creates $60 million annually in permanent spending obligations but only $26 million per year to cover those costs.  As tobacco revenues decline, Medicaid costs will continue to explode.  All taxpayers will be on the hook to make up the gaping difference.  The position of Citizens Against Government Waste has been consistently opposed to expansion.  But if Medicaid is to be expanded, funding it through a tobacco tax increase is one of the worst ways to pay for it.    

The Initiative would do little to improve public health, expand meaningful healthcare coverage, or raise revenue for the state.  Increasing cigarette taxes will not make much of a difference in a state’s smoking rate.  Montanans who live near Idaho, North Dakota, or Wyoming could simply make purchases in those states, where the cigarette tax is much lower; the same is true for purchases on Indian Reservations.  As cigarettes are often purchased in conjunction with other items like food and beverages, the revenue lost by Montana because of people buying cigarettes in other jurisdictions will be greater than merely revenue from cigarette taxes. 

Another sure way not to reduce Montana’s smoking rate is to increase the cost of vaping, which Initiative 185 does.  E-cigarettes have proven to be an effective tool for smokers looking to quit and a growing body of scientific evidence suggests they are much less harmful.  If this ballot question were all about getting people to stop smoking, it would not raise taxes on vaping products.

What the Initiative really seeks is more money for the state, which needs funds to maintain its Medicaid expansion.  But tobacco taxes are a notoriously unreliable and volatile source of revenue.  The more people smoke, the more revenue is generated.  The less people smoke, the less revenue is generated.  The view that increased tobacco taxes lead people to stop smoking and simultaneously raise revenue is at odds with itself.  It is a far better idea for states to raise revenue through stable, predictable, taxes with a broad base instead of targeting specific industries and groups.

Initiative 185 will not solve Montana’s problems.  It will not deliver better public health or a more fiscally sustainable future.  It will require tax increases for everyone.  We have been down this road before, and, if Initiative 185 passes, the smart money would be on its proponents asking voters to approve even higher taxes relatively soon.