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Dear Chairman Odell and Members of the Committee:

     On behalf of the National Taxpayers Union’s nearly 2,100 members in New Hampshire, I urge you to support House Bill 156, which would reduce the state’s excise tax on cigarettes by 10 cents per pack and on other tobacco products by 17 percent. The House has already passed H.B. 156 by a strong vote of 236-93. Although opponents of H.B. 156 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 source of revenue.

     Since the poor are more likely to smoke, New Hampshire’s low-income families, especially those who live in the depressed North Country, have disproportionately felt the pinch of cigarette tax hikes over the years. 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. Reducing the cigarette tax will help alleviate the tax burden on these families, who are struggling to get by in a tough economy.

     Sales of cigarettes and other tobacco products also comprise a substantial portion of business for small retailers. 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. Reversing some of the harmful tobacco tax hikes of recent years could help these businesses attract some of the consumer activity that may have migrated across state lines to stores in Maine and elsewhere. While it is unclear from the Fiscal Note what the revenue impact of H.B. 156 will be, there is no question that the economic impact would be a positive one for the state’s businesses.

     In any case, evidence from other states casts serious doubt on the assumption that higher tobacco taxes will lead to greater revenue and lower taxes will lead to less. 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 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 revenues following tobacco tax hikes.

     By enacting H.B. 156, New Hampshire leaders will demonstrate that they are serious about reforming the tax code to lessen the burden on the poor, lower costs for small business, and reduce reliance on unstable sources of revenue. Indeed, the Granite State can set an example for the entire nation to follow; our members hope you will do so, by passing H.B. 156.

Sincerely,