Politics

Have cigarette tax increases fallen out of fashion?

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With states looking for ways to meet budget shortfalls and the government pushing to deter Americans from consuming tobacco products, one might expect to see cigarette taxes increase.

Yet while the number of states enacting higher cigarette duties has reached the double digits in the past, this year just two states (Vermont and Connecticut) have raised taxes on the social pariahs of health-conscious modernity.

Which begs the question, why?

According to Patrick Gleason, director of state affairs for the conservative Americans for Tax Reform, tobacco has not been the revenue boon states that have increased cigarette taxes had hoped.

“The lack of interest in raising tobacco taxes this year can be attributed to the fact that tobacco taxes have indisputably proven to be a dubious and declining source of revenue,” Gleason told TheDC. “From 2003-2007, 16 of 59 tobacco tax hikes fell short of revenue projections.”

Here in Washington D.C., for example, the city’s 2009 $0.50 tax hike resulted in a severe drop in expected revenue. In 2010, the District of Columbia’s chief financial officer Natwar Gandhi reported to the mayor that the projected government intake was over $15 million below what they had initially estimated.

“The 50-cent increase in the cigarette tax rate was projected to increase revenue but also decrease volume. Collections year-to-date point to a more severe drop in volume than projected,” Gandhi reported to then Mayor Adrian Fenty “The estimate for cigarette tax revenue is revised downwards by $15.4 million in [fiscal year] 2010 and $15.2 million in [fiscal year] 2011.”

It seems that as the price of cigarettes goes up so too does the ingenuity of smokers in getting around the taxes, whether it be rolling cigarettes, buying bootleg, going out of the state, or quitting.

States have even started to move toward lowering taxes. This year New Hampshire passed a tobacco tax cut and states such as New Jersey and Rhode Island have similar legislation in the works. Maine Gov. Paul LePage even campaigned on a promise to cut taxes and veto any hikes on tobacco products.

Anti-smoking advocates, which promote increased costs as a way to deter smokers, have not been pleased with the lack tobacco taxes this year.

“The American Lung Association is frustrated the there haven’t been more states that have raised cigarette taxes,” the organization’s national policy director Thomas Carr told TheDC. “I suspect the political climate has something to do with it. Taxes have become a four letter word in some places. Unfortunately cigarette taxes are part of that broad brush. Public opinion polls show 60 percent plus of the population support them.”

Gleason pointed out that for revenue, cigarette taxes are proving to be a loser.

“New Jersey raised its cigarette tax by 17.5 cents in 2007, yielding $52 million less than Garden State lawmakers anticipated and $22 million less than was generated prior to that tax hike,” Gleason told TheDC. “Over the past decade it has become clear that tobacco taxes are an unreliable source of revenue and one in which no budget should depend on.”

Nationwide the average state cigarette tax is $1.46 per pack. New York has the highest with $4.35 a pack, Missouri has the lowest with $ 0.17.

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Tags : tobacco
Caroline May

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