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Press Release


Study Snuffs Out Myths About Tobacco Tax Hikes; Shows How Non-Smokers Get Burned

For Immediate Release March 20, 2008
Pete Sepp, (703) 683-5700

(Alexandria, Va.) -- Smokers are easy targets for elected officials looking to increase government revenue and score political points by punishing "unpopular" activities, but a new study from the 362,000- member National Taxpayers Union (NTU) argues that politicians should kick this habit. NTU's systematic, fact-based analysis convincingly debunks the myth that tobacco tax hikes don't affect non-smokers.

"Significant segments of the non-smoking population go along with efforts to raise tobacco excise taxes because these taxpayers believe they can avoid the resulting pinch by simply not buying cigarettes -- a classic case of the 'tax thee, but not me' mentality," said NTU Director of Government Affairs Kristina Rasmussen, who authored the study. "As the data shows, however, the end result is often 'tax we' -- tobacco tax hikes have very real fiscal implications for non-smoking taxpayers."

Rasmussen's paper outlines five reasons that non-smokers should oppose high tobacco taxes:

  1. States with low cigarette taxes tend to have lower overall tax burdens. The per capita state and local tax burden in high-tobacco tax states is 8 percent above the national average, while the general tax bill for residents of low-tobacco tax states is 15 percent below the national average.
  2. Tobacco tax hikes rarely result in other cuts and are often paired with other tax increases or cuts worth less than the tobacco tax boost. "Most states that increase cigarette taxes don't refund the revenue elsewhere -- they spend it," the study notes.
  3. Tobacco tax increases don't prevent other hikes. Taxpayers face a seven out of 10 chance of seeing another net annual tax hike within two years of a tobacco tax hike.
  4. Cigarette tax hikes may encourage other increases because the extra revenue often is tied to specific spending schemes (such as health care or education) and tobacco use rates are falling -- along with potential tax collections. State governments will need to look elsewhere to fill the gap, and non- smokers could be on the hook.
  5. Tobacco taxes don't spur economic growth. States that adopted a tobacco tax hike in fiscal year 2003 saw an average growth rate in gross domestic product from 2005 to 2006 that was 0.6 percent lower than states that did not adopt a tax increase.

"Whether or not an individual uses tobacco, tax hikes hurt everyone by encouraging the growth of government," Rasmussen concluded. "While tobacco tax increases will assuredly come up as funding 'solutions' in the future, taxpayers -- smokers and non-smokers alike -- would be better served by extinguishing such a notion and instead focusing on cutting the size of government."

NTU is a nonpartisan, nonprofit citizen organization founded in 1969 to work for lower taxes, smaller government, and economic freedom at all levels. Note: NTU Issue Brief No. 167, Debunking the "Tax Thee, But Not Me" Myth: Five Reasons Why Non-Smokers Should Oppose High Tobacco Taxes, is available online at www.ntu.org.

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