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Study Finds Tobacco Taxes Cause, Don’t Fix, Fiscal Problems
August 1, 2013
National Taxpayers Union Foundation (NTUF) just released a study that uncovers the grisly fiscal truth behind tobacco taxes - particularly, that all taxpayers and citizens are affected by the failure of these measures to live up to revenue projections, which leads to new taxes and budget crises.
Check out a rundown of the major findings below, and make sure to read the complete study HERE.
Cigarette tax hikes lead to different types of tax increases, fail to meet revenue projections. In nearly 70 percent of cases between 2001 and 2011, tobacco tax increases were followed by other tax hikes! Whether directly due to their failure to live up to revenue expectations, or simply because they signal a political apparatus desperate for more pet-program funding, there is no denying that every taxpayer has cause for concern when they hear a tobacco tax hike proposal.
Tobacco tax revenues are rarely used to reduce other taxes. Considering how frequently such hikes are made in the name of education or healthcare programs, or pitched by revenue-hungry legislators, this may not be surprising. Nevertheless, this finding is key since it demonstrates these tax hikes do little to create flexibility in budget management.
States with high cigarette tax rates have tax burdens an average of $1,356 above the national average. NTUF’s study actually found that the correlation between a state’s overall tax burden and its cigarette tax rate went both ways; states with lower cigarette taxes have lower overall tax burdens.
These types of tax increases are not associated with strong economic growth. States that hiked their tobacco taxes in some way in 2009 tended to have slower Gross State Product (GSP) growth over the following two : they grew at an average rate of 1.34 percent, compared to the U.S. average of 2.43 (a 1.09 percent lower growth rate).
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