Dear Legislator,
Onbehalf of the National Taxpayers Union’s nearly 2,500 members in Idaho, I urgeyou to reject any proposal that would increase the state’s excise tax oncigarettes. Although proponents claim that higher cigarette taxes are goodpublic policy, the reality is that such taxes disproportionately burden thepoor and are unreliable sources of revenue.
PoorIdahoans are more likely to smoke, so they will disproportionately feel theimpact of an increase in the state’s cigarette tax. A 2007 study by theHeritage Foundation showed that more than one-fourth of people who smoke livebelow the federal poverty line and another quarter of all smokers live within100-200 percent of the poverty line. To put these figures in perspective, onein ten Idahoans live at or below the poverty line, which is enough people tofill Bronco Stadium twice. Raising the cigarette tax to $1.50 per pack would,for example, cost an Idahoan who smokes a pack a day an additional $339.45 instate taxes per year – a 163 percent increase in state taxes alone. This is a substantial additional expensefor the poor, especially considering that Idaho already has the nation’s 13th-highest state and local tax burden as a percentage of income – a heavier loadthan citizens bear in any of your neighboring states.
Cigarettetaxes are also unstable sources of revenue. Idaho’s cigarette tax collectionsthis year are nearly 11 percent below levels just five years ago. Moreover,projected receipts from cigarette tax hikes are notoriously optimistic. NewJersey reported a $52 million shortfall in revenues after it raised itscigarette tax by 17.5 cents. Despite boosting its cigarette tax by 50 centslast year, the District of Columbia reported that it collected $15 million lessthan 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 followingtobacco tax hikes.
Raising anunreliable tax that heavily burdens the poor makes no economic sense. Insteadof pursuing such an imprudent course, Idaho should continue its admirableeffort to hold the line on state spending and foster economic expansion throughtax reform. By doingso, Idaho will be able to avoid massive deficits and grow the tax base byattracting jobs, people, and more economic activity. This process can andshould begin by ruling out any increase in the state’s cigarette tax.
Sincerely,
John Stephenson
State Government Affairs Manager