DearLegislator:
On behalf of more than 3,100 Nevadamembers of the National Taxpayers Union, I urge you to reject legislativeefforts to raise taxes on liquor and tobacco products. While proponents contendthat these punitive tax hikes are a “win” for Nevada taxpayers, the reality isthat these regressive schemes rarely, if ever, produce the promised revenue andare burdensome to small businesses and the poor.
Senate Bill 386, which will be heard inthe Senate Revenue Committee tomorrow, would hike cigarette taxes to $2.00 perpack, an increase of 150 percent from the current rate of $0.80 per pack. TheAssembly Taxation Committee will also be taking up Assembly Bill 333, whichwould raise cigarette taxes to $1.70 per pack and other tobacco products taxesfrom 30 percent to 55 percent of the wholesale price. AB 333 would also hikelevies on beer, wine, and liquor. All told, this bill would constitute a taxincrease on Nevada’s citizens and businesses of more than $250 million at atime when the state is still struggling to extricate itself from the recenthousing and financial crisis.
Despite fanciful claims from theiradvocates, many tobacco tax hikes elsewhere have failed to yield the desiredrevenue. New Jersey reported a $52 million shortfall in tobacco tax revenuesafter it raised its cigarette tax by 17.5 cents. Subsequent to boosting itscigarette tax by 50 cents in 2009, the District of Columbia reported that itcollected $15 million less than expected, and $7.6 million less than itcollected prior to the tax hike.Other states, including Arkansas, Maryland, Mississippi, and Rhode Island, havealso reported gaps in revenue collections following tobacco tax hikes.
While tobacco and alcohol products mayseem like politically-convenient targets for tax increases, the reality is thatthey are a major source of business for convenience stores and other retailoutlets. Raising taxes on cigarettes, beer, wine, and liquor would place Nevadabusinesses at a serious competitive disadvantage to those in neighboring stateslike Arizona, Utah, and California, which in some cases would levysignificantly lower taxes if SB 386 or AB 333 were to pass. Moreover, since moderateincome residents are more likely to partake in these products, they will disproportionatelyfeel the impact of an increase in tobacco and alcohol taxes. Raising a tax thatthreatens to curtail commercial activity (thereby shrinking the revenue base)and heavily burdens the poor makes no economic sense.
Rather than increasing regressive taxes,we urge the Legislature to continue pursuing ways to trim wasteful spending andprotect taxpayers. We look forward to working with you to enact common-sensereforms that do not include damaging tax hikes..
Sincerely,
Vice President of Government Affairs