With the Turnbull Government fast running out of meaningful, revenue-raising tax reform options in the May Budget, it looks as if it might copy Labor’s plan to raise the excise on cigarettes. From the Daily Telegraph:
THE price of a packet of cigarettes could soon soar to $40 if the Turnbull government copies a Labor plan to help pay for income tax cuts by slugging smokers.
A senior government source confirmed to The Daily Telegraph that a proposal to increase the tobacco excise in the May Budget would be taken to the Expenditure Review Committee.
It is understood Treasury has already costed various options and Labor has claimed that its proposed tobacco excise increase would raise $47 billion in revenue over 10 years.
Treasury modelling, however, is believed to show a more modest return.
Grattan Institute Budget expert, John Daley, has previously warned not to use the revenue raised from tobacco excise to pay for increased expenditure on social programs, arguing that such a move could actually worsen the structural Budget deficit:
“You’re taking a severe structural budget problem and making it even worse,” John Daley, chief executive of the Grattan Institute, said. “Tobacco excise is a structurally declining tax base. It is not going to keep pace with inflation because tobacco use is falling… if you put up prices further that will reduce usage even further.”
Rather than slugging smokers up to $2 per dart, I’d rather see the Government legalise and tax marijuana, as discussed last month. Several US states have raised significant Budget revenue from taxing marijuana, which has then been used to boost expenditure on important social programs.
There is also no good public policy reason why alcohol and tobacco are legal and pot isn’t. Moreover, legalisation of marijuana would ensure purity of supply, reduce profits to organised crime, and lower law enforcement costs.
It’s a win, win, win.
