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An Open Letter to the New Hampshire Senate Ways and Means Committee: Oppose the Misguided Tobacco Tax
April 8, 2013
On behalf of National Taxpayers Union’s 2,100-plus New Hampshire members, I urge you to oppose the Governor and House of Representatives’ push to raise the cigarette tax from $1.68 to $1.98 per pack. Although supporters of this tax hike claim that high cigarette taxes are good public policy, the reality is that such taxes disproportionately burden the poor and small retailers while providing an unreliable stream of revenue.
Since the poor are more likely to smoke, New Hampshire’s low-income families would be hit hardest by the proposed 18 percent tobacco tax hike. 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. Raising the cigarette tax would place a heavier burden on these families, who are struggling to get by in a tough economy.
The proposed tobacco tax hikes would also harm small businesses. The National Association of Convenience Stores reports that cigarettes account for about one out of every three dollars of total sales nationwide at their establishments. When out-of-state customers pick up a pack of cigarettes, they often buy gas, food, and other items that help to grow New Hampshire’s economy. A cigarette tax hike to nearly $2 per pack would erode New Hampshire’s competitive advantage over nearby states like Maine.
Additionally, evidence from other states casts serious doubt on the assumption that higher tobacco taxes would necessarily lead to greater revenue. 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 in 2010, 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 expected revenues following tobacco tax hikes.
As your constituents deal with higher federal tax rates and soaring health care costs, smokers and non-smokers alike would be best-served by avoiding this 18 percent cigarette tax hike. Instead, New Hampshire leaders should look to reform the tax system to lessen the burden on the poor, lower costs for small business, and reduce reliance on unstable sources of revenue.Sincerely,Lee SchalkState Government Affairs Manager