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NTU Urges New Mexico House to Reject Massive Tax Hikes

by Clark Packard / /


Dear Members of the New Mexico House of Representatives,

On behalf of National Taxpayers Union’s (NTU) New Mexico members, I urge you to reject HB 282 sponsored by Representatives Elizabeth Thomson and Deborah Armstrong. If enacted in its current form, the bill would lead to a less healthy, less prosperous state.

The bill’s most fundamental flaw is based on a common misperception that vapor products contain tobacco. In fact, they do not; they contain nicotine without the harmful chemicals found in traditional cigarettes. HB 282 would amend the state’s definition of “tobacco product” to include vapor products and then drastically raise the tax on non-cigarette tobacco products from 25 percent to 75 percent of the wholesale price. This is a misguided approach to public health. In fact, the United Kingdom’s public health agency found that vapor products are 95 percent safer than traditional cigarettes. The U.K. is now prescribing these products to aid smoking cessation. For millions of Americans, vapor products are proving to be a gateway to kicking their bad habits. Simply put, erecting barriers to products that people are using to quit smoking is irresponsible public policy.

In addition to raising taxes on potentially life saving devices and products, the bill would raise cigarette taxes by $1.50 to $3.16 per pack. Cigarette taxes are highly regressive, affecting low income earners far more than high income earners.

By raising the cigarette tax to $3.16 per pack, New Mexico would have one of the highest levies in the country. Its neighbors in Arizona, Colorado, Texas and Utah would have significantly lower taxes. This would create an incentive for black market purchases or for cross-border sales of tobacco products from neighboring states. According to a 2017 study by the non-partisan Tax Foundation, New Mexico ranked third in the entire country for percentage of cigarettes smuggled or imported into the state. Raising the cigarette tax will further exacerbate this problem.

Finally, raising cigarette taxes – a declining source of revenue – to pay for permanent spending is a misguided budgetary practice. Cigarette taxes usually yield far lower revenue than initially projected; as the National Conference of State Legislatures has demonstrated, “cigarette taxes are not a stable source of revenue.” Indeed, a 2013 study by NTU’s research arm, National Taxpayers Union Foundation, found that revenue projections were met in only 29 of 101 cases where cigarette and tobacco taxes were raised between 2001 and 2011.

Given the enormous problems with HB 282, NTU urges all members of the New Mexico House of Representatives to reject it.

Sincerely,

Clark Packard
Counsel and Government Affairs Manager