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1 Andrew Chamberlain & Gerald Prante, Who Will Pay Taxes for Tennessee Governor's Schools First Initiative, and Who Will Receive the Spending 1 (2007)

handle is hein.taxfoundation/ffiexz0001 and id is 1 raw text is: r:OuUNNDAT10N.
April 18, 2007
Who Will Pay Taxes for Tennessee Governor's Schools First
Initiative, and Who Will Receive the Spending?
by Andrew Chamberlain and Gerald Prante
Fiscal Fact No. 84
Introduction
In his most recent State of the State Address, Tennessee Gov. Phil Bredesen proposed a
40-cent increase in the state's cigarette tax to fund an education initiative known as
Schools First.
The plan consists of $219.6 million of new spending on a broad array of education,
agriculture and smoking cessation programs.' To fund the spending, the Governor has
proposed increasing the state's cigarette tax from 20 to 60 cents per pack, which is
estimated to raise roughly 96 percent of the required $219.6 million for the plan.2
While the Governor's plan to boost education spending may be well intended, by funding
the Schools First initiative through tobacco taxes rather than general sales taxes, it will
make low-income households in Tennessee much worse off that they could otherwise be.
Because the Governor's proposal relies almost entirely on cigarette tax revenue, at least
three components of the plan have the perverse effect of redistributing millions of dollars
from low-income to upper-income households in the state of Tennessee.
As explained below, this result could largely be avoided by funding the proposal through
general sales taxes rather than regressive cigarette excise taxes.3
The Schools First Initiative
The revenue and spending items that make up Gov. Bredesen's Schools First initiative are
listed in Table 1, along with their 2007-2008 budget amounts. Of the $219.6 million of
revenue from the proposed cigarette tax increase, roughly 90 percent is targeted at
various education programs, while the remaining 10 percent is divided between smoking
prevention programs and farm programs.

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