(The Center Square) – Higher taxes on marijuana, gambling and tobacco in Ohio would likely cut down on negative impacts but could push consumers to illegal markets, a group of Ohio economists says.
Gov. Mike DeWine recently proposed raising taxes on marijuana and cigarettes to pay for a child tax credit and hiking the gambling tax to pay for sports stadiums and student participation fees in extracurricular activities.
Both the Senate and House of Representatives continue to debate DeWine’s budget plan. A new budget must be passed and signed into law by DeWine by the end of June.
A new survey of 17 statewide economists from Scioto Analysis, a Columbus-based policy analytical group, showed 15 believe higher taxes would have an impact on “negative externalities” associated with marijuana, cigarettes and gambling.
“The only consideration that keeps me from ‘strongly agreeing’ with this statement is if the taxes are high enough to push this type of consumption into unregulated markets,” Ohio Wesleyan University Professor Will Georgic said. “We will certainly see a reduction in legal cannabis consumption, legal gambling, and tobacco consumption relative to what would be observed without the tax increase. The only question is whether consumers will break the law to avoid these taxes.”
Kay Strong, an independent economist, was uncertain if demand would drastically decrease but believed higher taxes would benefit the government.
“These products have low price elasticity of demand” Strong said. “Raising their ‘price’ will have a small effect on reducing demand but a large revenue return for government.”
Some believe raising taxes reduces consumption and health care impacts.
“Increasing taxes on cannabis and tobacco will reduce the overall usage of these products among low-income households,” said Michael Jones, with the University of Cincinnati. “Individuals who eliminate tobacco use see significantly better health outcomes and quality of life.”
Jonathan Andreas, with Bluffton University, believes the higher tax would harm low-income consumers immediately but not in the long run, saying those same consumers tend to suffer higher consequences of marijuana use, gambling and tobacco use.
“In the short-run, it will harm them, but not in the long-run,” Andreas said. “Lower-income households pay more of the burden of the tax, but they also pay a much higher burden from the problems of excessive drugs and gambling. They also have the most elastic long-run demand, so they are also the most likely to benefit from the new incentive to moderate their use. Because they will be forced to cut back on the quantity of drugs and gambling, in the long run, they will probably not pay more income towards drugs and gambling despite the higher price as the higher price will be offset by a reduction in the quantity they use and that will give a net benefit.”
