Dear Legislator,
Onbehalf of the National Taxpayers Union’s nearly 2,000 members in West Virginia,I urge you to reject House Bill 2973, which would raise the cigarette excisetax by $1 per pack and increase the tax on smokeless tobacco by a whopping 614percent. Although proponents claim that higher tobacco taxes are good publicpolicy, the reality is that such taxes disproportionately burden the poor, harmsmall retailers, and are unreliable sources of revenue.
Lower-incomeWest Virginians are more likely to smoke, so they will disproportionately feelthe impact of an increase in the state’s tobacco taxes. 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. Raising the cigarette tax to $1.55 per packwould, for example, cost a West Virginian who smokes a pack a day an additional$365 in state taxes per year – a 182.5 percent increase in state taxes alone.This is a substantial additional expense for the poor and those on fixedincomes.
Smallretailers will also suffer under these tax hikes. Tobacco items account forone-third of total purchases in convenience stores nationwide, according to theNational Association of Convenience Stores. By one estimate, HB 2973 could costthe more than 2,500 tobacco product retailers in West Virginia $400 million ayear in sales, as smokers seek out cheaper alternatives from neighboringstates. Losses due to smuggling activity figure into that total as well.
Cigarettetaxes are also unstable sources of revenue for the states as optimisticprojections all too often give way to stagnant collections… or worse. WestVirginia’s tax-paid cigarette sales increased only 0.4 percent over the lastdecade. New Jersey reported a $52 million shortfall in revenues after it raisedits cigarette 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.
It simply doesnot make sense to raise an unreliable tax that heavily burdens the poor andsmall retailers, particularly in this economy. Therefore, our members hope youwill oppose HB 2973.
Sincerely,
John Stephenson
State Government Affairs Manager
cc: SenatePresident Earl Ray Tomblin