Dear Members of the Pennsylvania General Assembly:
As you consider the budget proposal put forward by Governor Wolf, National Taxpayers Union (NTU) urges all members to oppose his proposed increase in taxes on tobacco products and e-cigarettes. Although you were able to effectively fend off calls for increases in the sales tax and income tax, the Governor’s misguided current proposal would disproportionately affect poorer residents and provide an unstable source of revenue.
According to a recent study by the Commonwealth Foundation, Pennsylvania already leads the nation in the collection of “sin taxes,” collecting over $2.7 billion every year from taxes on alcohol, gambling and tobacco products. The proposed tax of 40 percent on e-cigarettes would raise the cost of a product that has helped many people kick their dangerous smoking habit. This is of particular importance considering a study conducted by Public Health England in 2015 found e-cigarettes to be 95 percent safer than traditional cigarettes.
In addition to this tax, Governor Wolf is also seeking to raise the cigarette tax by $1 per pack. Combined, these taxes are projected to collect over $500 million in the next year. Taxes on cigarettes have become increasingly unreliable as a source of revenue. According to the Independent Fiscal Office, the revenue from the cigarette tax in 2017 is projected to fall 3.7 percent in the Keystone State. In fact, in the past four years, New York, which has the highest cigarette tax in the nation has seen revenue from this tax fall $400 million. Some of this can be explained by a declining smoking rate, but it also a result of sales moving to the black market and people crossing borders to acquire cigarettes at a cheaper rate.
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 increased between 2001 and 2011. In addition to being unreliable revenue sources, these taxes also disproportionately affect the poor. According to the Center on Budget and Policy Priorities, 29 percent of poor adults smoke versus 18 percent of non-poor adults. This results in the poor bearing a disproportionate burden of the cost of the tax while spending a higher percentage of their income to pay for the product.
With these facts in mind, NTU urges all members of the General Assembly to oppose Governor Wolf’s attempt to raise taxes on tobacco products and e-cigarettes. Instead of seeking to raise taxes on the state’s low income residents, I urge your body to take up reforms that shrink the state budget to address shortfalls.