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Oppose Misguided Tobacco Tax Hikes!
An Open Letter to the Idaho Legislature
March 29, 2011
By Andrew Moylan
On behalf of the National Taxpayers Union’s 2,500 members in Idaho, I urge you to reject legislation that would raise the tax for a pack of cigarettes by $1.25 (to more than triple the current level) and impose an additional 25 percent tax on other tobacco products. While proponents claim tobacco tax hikes are a “win” for Idaho taxpayers, the reality is that these punitive schemes rarely, if ever, produce the promised revenue and are burdensome to small businesses and the poor.
Despite fanciful claims to the contrary, many tobacco tax hikes across the country have failed to produce the promised revenue. New Jersey reported a $52 million shortfall in tobacco tax revenues after it raised its cigarette tax by 17.5 cents. Subsequent to boosting its cigarette tax by 50 cents in 2009, 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 revenue collections following tobacco tax hikes.
Furthermore, tobacco products account for roughly one out of every three dollars in sales for convenience stores nationwide, according to the National Association of Convenience Stores. A higher tobacco tax would add to the cost of their products, jeopardizing the cash flow of these establishments within Idaho. Raising these taxes would also all but eliminate the competitive advantage Idaho businesses enjoy over neighboring states that currently levy far higher tobacco taxes such as Washington and Montana.
Moreover, since the poor are more likely to smoke, they will disproportionately feel the impact of an increase in the tobacco tax. If enacted, this proposal would cost a person who smokes a pack a day more than $450 in additional taxes per year. Raising a tax that threatens to curtail commercial activity (thereby shrinking the revenue base) and heavily burdens the poor makes no economic sense.
Rather than increasing a regressive tax, we urge the Legislature to continue pursuing ways to trim wasteful spending and protect taxpayers. Doing so will protect Idaho’s businesses and avoid additional burdens on the poor. We look forward to working with you to enact common-sense reforms that do not include damaging tax hikes.