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An Open Letter to the Pennsylvania Senate: Oppose the Massive Philadelphia Cigarette Tax Hike!

Dear Senator:

On behalf of National Taxpayers Union’s 500-plus members in Philadelphia and 17,300 members across the Keystone State, I urge you to oppose the $2 Philadelphia cigarette tax hike approved yesterday by the Senate Finance Committee. Raising the average total cost of a pack of cigarettes to $8.73 in Philadelphia would disproportionately burden low-income residents and hurt small retailers in an attempt to squeeze more out of an unreliable stream of revenue.

The prospect of a tobacco tax hike is very troubling to NTU’s members. Since the poor are more likely to smoke, low-income families would be hit hardest by the proposal. 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.

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. The proposed hike is certain to drive more dollars out of the city, as more Philadelphians would head to neighboring counties with lower cigarette taxes, like nearby Bucks County. While shopping outside of city limits, consumers are also likely to purchase gas, food, and other items that help to grow local economies.

Additionally, evidence from across the country casts serious doubt on the assumption that higher tobacco taxes would necessarily lead to greater revenue. For example, New Jersey reported a $52 million shortfall in revenues after it raised its cigarette tax by 17.5 cents. Washington, DC and New York City have also reported gaps in expected revenues following tobacco tax hikes. While the goal of the hike is to generate tax dollars for troubled schools, Philadelphia could end up losing this tax windfall altogether or see it seriously diminished.

Given that Pennsylvanians are already coping with higher federal tax rates and soaring health care costs, your constituents would be best served by tax policies that emphasize fiscal discipline and economic prosperity. As such, I hope you will oppose tobacco tax hikes that would harm smokers and non-smokers alike.

Lee Schalk
State Government Affairs Manager 

cc: Governor Tom Corbett