Michigan - Tax Godzilla

Somebody might want to call the fire department to Michigan Gov. Jennifer Granholm's office because her tax pen is on fire. Leading a list of ways for the government to suck more dollars from citizens and visitors, she signed into law a bill on Thursday increasing tobacco taxes. Effective July 1st, taxes on cigarettes will increase by 75 cents to $2.00 per pack. It's anticipated that tobacco taxes will produce $1 billion in revenue in the next fiscal year. Others see a down side.

"This is a devastating blow," said Polly Reber, spokeswoman for the Michigan Distributors and Vendors Association, which represents about 30 tobacco wholesalers. "It's a pretty significant tax increase for a Republican Legislature to vote for, or for any legislator to vote for."

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Ed Welgarz, executive director of the Service Station Dealers Association, said the higher cost of cigarettes will encourage more cigarette smuggling from states with lower taxes; more Internet sales of cigarettes, which don't pay the state tax, and more convenience store robberies for cigarettes.

Gov. Granholm also has plans to raise taxes on liquor and to reinstate an estate tax on estates valued at more than $1 million.

My take is that Gov. Granhom and the legislature may be overly optimistic about the amount of revenue to be derived by increasing the tobacco tax. At a tax rate of $20 per carton, smokers will go to great lengths to find alternative, cheaper ways to get their cigarettes.

The voters of Michigan might want to reconsider the virtue of keeping the current crop of tax-happy politicians in office. I'd suggest that it's in the citizens' best interest to get rid of them.