Proposed 'Sin Tax' on Cigarettes Sparks Hope for Preschools

Cory Bennett

After California decided to tax each pack of cigarettes an extra 50 cents, the state used the resulting revenue—which added up to billions of dollars—to try to get every child into preschool.

That was 15 years ago. On Wednesday, President Obama proposed taking a similar plan nationwide.

“We believe the president’s staff stole our descriptors,” said Dr. Celia Ayala, laughing. Ayala is the CEO of Los Angeles Universal Preschool, which funds more than 300 preschools in Los Angeles County. The seed money for LAUP—$580 million—was taken out of the revenue from California’s tobacco tax initiative, known as Proposition 10. “We would not exist if not for Prop 10,” Ayala said.

In his 2014 budget, Obama outlined a plan to pay for his universal preschool initiative by raising federal taxes on tobacco products, namely a 94-cent hike on each pack of cigarettes. According to the budget, the early education investments would cost $77 billion over the next 10 years, more than offset by the $78 billion raised through new tobacco taxes.

Right now, advocates argue, the country is trying to build a second floor on a weak foundation. Investing in pre-K education—the foundation—boosts future earning potential. It also lowers the number of children in special education and lowers dropout rates—the second floor. Nobel Prize-winning economist James Heckman has argued that each dollar invested in quality preschool programs returns $60 to $300 over a child’s lifetime.

But given the partisan climate and belt-tightening rhetoric in Washington, not to mention bulwark tobacco lobbyists, implementation will be a slog. Altria Group, the tobacco industry’s largest lobbying organization, has also come out against the idea, pointing to the 2009 tax hike on cigarettes Obama signed to help fund an expansion of the State Children’s Health Insurance Program.

“We think it is patently unfair to single out adult tobacco consumers with another federal tobacco tax increase to pay for a broad, new government spending program [claiming] to have benefits for everyone,” Altria’s spokesperson David Sutton said, adding that he believed the tax was also unfairly regressive.

Sin taxes have long funded socially beneficial projects; for example, state lottery revenues fund public schools. But Obama’s proposal is untested at the federal level. Sen. Tom Harkin, D-Iowa, recently proposed legislation to increase the tobacco tax as a smoking deterrent.

“An increase in the tobacco tax will not only help save lives and stave off chronic diseases that cost our health care system $96 billion per year, but under the president’s proposal, will also help give kids an early start in their education and in life,” Harkin said.

And not all Tobacco Road representatives are against the idea. Rep. G.K. Butterfield, D-N.C., was hesitant to commit to a vote until learning more, but he said, “I would not oppose a nominal increase that would directly support early childhood education, which is something my district and many across our country so desperately need.... As a representative from one of the largest tobacco-producing states, I believe our kids are our most important asset, and they deserve our investment.”

But for all its proponents, doubts remain about the idea’s plausibility. Tax revenue is inherently variable, and higher taxes could cut down on consumption. Over time, funding could dry up. LAUP is still drawing from its seed money, but after 2016, Ayala said, the organization doesn’t know where the next cash infusion will come from, and tobacco tax revenue is declining. Ayala trusts the long-term benefits of preschool for children will lower educational costs in the long run, freeing up funds that can be shifted back to early education.

While announcing the budget from the White House Rose Garden on Wednesday, Obama bemoaned the lottery system some states have to use to decide which children get into early education Head Start programs. In Los Angeles County, Ayala said, Head Start can only serve roughly 35,000 of the city’s 110,000-plus 4-year-olds. LAUP serves an additional 11,000 and state preschools 30,000, but that still leaves 35,000 outside of any official pre-K program. Obama’s budget allocates $750 million in 2014 for a new federal-state partnership to expand Head Start slots for 4-year-olds of low- and moderate-income families.

“This is a great start,” Ayala said.

But not a long-term fix just yet.