The downside of the  opioid tax 

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Good afternoon,

On Thursday, the General Assembly passed a little-noticed bill that levies a tax or as sponsors called it an “impact fee” on opioids in Delaware. Proceeds from the tax would go to drug treatment programs and research. (See story below).

Freshman Republican Rep. Michael Smith of Newark was initially a sponsor of the measure but later withdrew his support.

To some critics, it might have appeared that Smith fell for the arguments of fellow Republicans who reflexively oppose taxes.

Smith says the issue goes deeper.

“We all agree on the intent of the bill, but the process is wrong. It’s bad public policy. What’s next? We put a fee on cell phones because people text and drive and someone does. We put a fee on cars for a death? No, because it’s bad public policy,” Smith wrote. “This is a bill that isn’t necessary because of the punitive process that has already taken shape.”

The bill does mark a change from the normal stance of the state collecting taxes and fees, and not earmarking the proceeds for specific purposes. One exception is the state’s lodging tax.

Backers of the bill said opioids are different, citing the state’s heavy use of the drugs that have damaged the economy and ended many lives.

Smith and backers of the bill both make valid points.

It is clear that for years that many involved in the legal side of opioids were well aware that production far exceeded legitimate demand. A tax would be one way to address the issue.

Still, if Smith’s fears are realized, impact fees could end up being backdoor tax hikes passed under the guise of a solution for society’s ills.

Another problem is overhead costs. If I am reading the fiscal note accompanying the bill correctly, as much as 15 percent of revenue could end up as administrative costs. That could reduce proceeds by $1 million or so over a three-year period.

Legal challenges to the bill as pharma companies get invoices couldfurther drain revenues.

This is a case of a bill crafted with the best of intentions that comes with flaws.

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