Last week, Pennsylvania Governor Ed Rendell signed a $28 billion budget that increases spending on public education and economic development. But Rendell doesn't sound very happy about the budget. Since he put his signature on the budget bill, he has bemoaned the fact that the State Legislature didn't go along with his proposal for the second straight year to raise the cigarette tax and impose a new tax on cigars on smokeless tobacco products. In his words, Rendell called rejection of the tax "unfathomable."
What's unfathomable to me is why the Governor of the Commonwealth of Pennsylvania, my home state, is so keen on raising and expanding taxes that would have substantially increased the tax burden on residents. Pennsylvanians, including people like my family, already pay the 11th highest tax burden in the nation, according to the Tax Foundation. Facing increasing property taxes, the last thing my family needed was a higher tax burden.
Further, the proposed cigarette and tobacco tax hikes would have cost jobs. Convenience stores along Interstate 81 would have suffered as travelers bought fewer cigarettes to avoid the tax. Specialty smoke shops, who sell cigars, would have sold less product and likely relocated to another state to avoid the tax, taking their jobs with them. Michael Vandenstockt, the marketing director of the Famous Smoke Shop in Forks Township, said his company and its 70 employees might have moved to a jurisdiction with lower taxes such as New Hampshire or Florida if the tax passed. To see a small business like the Famous Smoke Shop leave Pennsylvania would have been sad not only for the already economically-depressed Lehigh Valley, but for patrons like me; I went to college near the shop and vividly remember buying cigars to share with my buddies to celebrate football team victories and our graduation.
Instead of bemoaning no tax hikes, perhaps Rendell should celebrate the fact that at least 70 jobs won't leave Pennsylvania. In fact, Pennsylvania will likely get a boost in business activity and revenues as smokers from Maryland, New Jersey, and New York flock to the convenience stores and smoke shops like Famous Smoke to buy what they want. As my friend and colleague Joshua Culling points out, we are already seeing New Yorkers travel to retailers in the northeastern part of the Keystone State to avoid New York's onerous cigarette taxes, which as of last week became the highest in the nation at $4.35 per pack. Maybe Rendell should stop bemoaning no tax hikes in the budget and start celebrating his state's new competitive edge.