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Letter


Oppose a Burdensome Cigarette Tax Hike on the Poor!
An Open Letter to the Idaho Legislature:

December 14, 2010

Dear Legislator,

     On behalf of the National Taxpayers Union’s nearly 2,500 members in Idaho, I urge you to reject any proposal that would increase the state’s excise tax on cigarettes. Although proponents claim that higher cigarette taxes are good public policy, the reality is that such taxes disproportionately burden the poor and are unreliable sources of revenue.

     Poor Idahoans are more likely to smoke, so they will disproportionately feel the impact of an increase in the state’s cigarette tax. A 2007 study by the Heritage Foundation showed that more than one-fourth of people who smoke live below the federal poverty line and another quarter of all smokers live within 100-200 percent of the poverty line. To put these figures in perspective, one in ten Idahoans live at or below the poverty line, which is enough people to fill Bronco Stadium twice. Raising the cigarette tax to $1.50 per pack would, for example, cost an Idahoan who smokes a pack a day an additional $339.45 in state taxes per year – a 163 percent  increase in state taxes alone. This is a substantial additional expense for the poor, especially considering that Idaho already has the nation’s 13th- highest state and local tax burden as a percentage of income – a heavier load than citizens bear in any of your neighboring states.

     Cigarette taxes are also unstable sources of revenue. Idaho’s cigarette tax collections this year are nearly 11 percent below levels just five years ago. Moreover, projected receipts from cigarette tax hikes are notoriously optimistic. New Jersey reported a $52 million shortfall in revenues after it raised its cigarette tax by 17.5 cents. Despite boosting its cigarette tax by 50 cents last year, the District of Columbia reported that it collected $15 million less than expected, and $7.6 million less than it collected prior to the tax hike. Other states, including Arkansas, Maryland, Mississippi, and Rhode Island, have also reported gaps in revenues following tobacco tax hikes.

     Raising an unreliable tax that heavily burdens the poor makes no economic sense. Instead of pursuing such an imprudent course, Idaho should continue its admirable effort to hold the line on state spending and foster economic expansion through tax reform. By doing so, Idaho will be able to avoid massive deficits and grow the tax base by attracting jobs, people, and more economic activity. This process can and should begin by ruling out any increase in the state’s cigarette tax.

Sincerely,

John Stephenson
State Government Affairs Manager