Cigarettes and Preschoolers Don't Go Together

August 22, 2013

During his 2013 State of the Union address, President Obama proposed a plan to implement a universal preschool program. Although the proposal has not been prominently featured in the news since the speech, Education Secretary Arne Duncan has been pressing Republican legislators to support the president's plan, which would increase cigarette taxes to $1.95 per pack to finance universal preschool, say Scott Drenkard and Noah Glyn of the Tax Foundation.

The administration's goal is to "ensure that more children and families have access to high-quality early learning and development programs."

The administration points out that the United States is 28th in the world in enrollment rates for four year olds and 25th in public spending on early education as a percentage of gross domestic product. While these statistics demonstrate that there is room for improvement, the administration's preferred method of financing the program is deeply flawed in the long run, as states will be forced to shoulder an increasing share of the costs of the program as time goes on, and cigarette tax revenue is diminishing over time as people turn away from smoking.

  • To send every four year old to preschool, the administration wants to dedicate $75 billion over 10 years in direct spending plus an additional $750 million in discretionary grants to states to help implement the plan.
  • Total federal spending for the program in fiscal year 2014 would be $1.3 billion, but it would grow to nearly $11 billion by fiscal year 2020.
  • The even bigger problem is that the administration plans on paying for universal preschool by increasing the federal cigarette excise tax from $1.0066 per pack to $1.95 per pack.
  • While it might be politically expedient to isolate a small unpopular group (smokers) to pay for a service for a popular group (preschoolers), universal education would in fact be universal -- and therefore should be paid for with broad based (universal) taxes.

But even if the principle of broad-based taxation is not persuasive, funding pre-kindergarten education with tobacco tax revenue will not work in the long run, as tobacco use has steadily declined since 1963. Per capita consumption of tobacco surged in the mid-20th century, but has since declined year after year.

This is a recipe for increasingly large deficits, as the cigarette tax will fail to raise enough revenue beyond the first 10 years. If states are unable to pay for their share of the universal preschool, it is also possible that the federal government will have to pick up an even bigger percentage of the cost.

Source: Scott Drenkard and Noah Glyn, "Cigarettes and Preschoolers Don't Go Together," Tax Foundation, August 14, 2013.

 

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