A Modest Proposal for Raising Education Revenue in Arkansas Without a Lottery

March 11, 2008

Lieutenant Governor Halter recently revived the idea of starting a state lottery to raise money for scholarships. While state-run lotteries are certainly popular (42 states and D.C. have them), it might just make sense for Arkansas to take a different approach. A lottery would require quite a bit of work to start up, so why not just take over a business that already exists in the state: selling cigarettes?

The legislature could ban the sale of cigarettes by private vendors and open government-run and owned tobacco stores throughout the state, with a massive tax to raise scholarship money.

This plan would require widespread advertising, just like the advertising in states with lotteries. We would like to suggest the following catchy jingle for the new Arkansas State Cigarette Advertising and Merchandising (A-SCAM) Agency:

Buy Arkansas Cigarettes
and your ash will become cash!
For the students who want to read,
a puff is enough
to buy the books that they need!

Or perhaps a simpler slogan would suffice: “Buy Arkansas State Cigarettes and light up a student’s education!”

We understand that some people will oppose this plan-people who don’t care about education, obviously. The naysayers might argue that tobacco sales and marketing is not an appropriate activity for state governments. Arkansas policymakers should respond with the same arguments that are used to defend state lotteries. Smoking is unhealthy, so why shouldn’t the state raise money from people stupid enough to engage in such a dangerous activity (just like gambling)? Sure, the state already raises a small fortune from tobacco excise taxes, but why not go a step further? If the state has a monopoly on tobacco sales and advertises smoking heavily, imagine the revenue it could raise!

After all, if the tax code can’t be used to make moral judgments about which consumer goods are “stupid” or “wrong” and to punish citizens who purchase those goods, then what is it for?

Some goody-two-shoes might whine that the state would then actually need people to smoke. But the Arkansas treasury is dependent on cigarette sales as it is. Most legislators have already learned to walk the fine line between encouraging citizens to participate in an unhealthy activity to generate revenue and discouraging the activity through punitive taxes. Policymakers in lottery states know plenty about this paradox.

Another benefit of this plan is that legislators will not have to call the revenue raised “tax revenue” or even acknowledge that the cigarette taxes are taxes. Since cigarettes will be sold only by the government, the state can call the revenue whatever it likes. After all, states with lotteries call their lottery revenue “miscellaneous revenue” or “profits,” even though it’s actually implicit tax revenue; why should it be any different for State Cigarettes? This means that legislators who want to raise taxes without their constituents’ knowledge will now have a handy way of doing so (and without violating that pesky no-new-taxes pledge!).

Best of all, since people who buy State Cigarettes will purchase them voluntarily, they will not realize they are being taxed and will not demand transparency in the tax system. Everyone knows that an item that’s purchased voluntarily cannot be taxed, because taxes are mandatory. That’s how it works with state lotteries, according to lottery proponents, so the same logic will most certainly apply to State Cigarettes.

Opponents of this plan, just like opponents of lotteries, will no doubt claim that the revenue raised will be a form of regressive taxation disproportionately burdening the poor. They may also claim that a high tax rate on an item enjoyed by a subset of the population is unfair, since taxes pay for public services enjoyed by everyone. They might even have the audacity to allege that the revenue from State Cigarettes might not be used entirely for education since earmarked revenue is fungible, including lottery revenue.

Pro-State-Cigarette policymakers should simply attack their opponents for not caring about education, which is the only thing that matters. Anyone who cares about raising money for Arkansas students will enthusiastically support any plan that lets the state run and advertise a monopoly business with a high, regressive tax (not accurately labeled a tax) on one particular, potentially unhealthy consumer good.

Relying solely on cigarette smokers might be a gamble, but isn’t it the only way to “light up a student’s education”?


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