Dear Legislator:
On behalf of the National Taxpayers Union’s 1,100 members in Rhode Island, I urge you to reject Governor Chafee’s proposal to further increase the state’s tobacco tax and instead pass H.B. 7639, sponsored by Representative Robert Phillips, which would reduce the cigarette tax by $1.00 per pack. The Ocean State’s onerous tobacco taxes punish the poor and harm small businesses.
Since the poor are more likely to smoke, Rhode Island’s low-income families have disproportionately felt the pinch of cigarette tax hikes over the years. According to data from the Centers for Disease Control, over 25 percent of smokers in the state earn less than $15,000 per year. Reducing the cigarette tax will help alleviate the tax burden on these families, who are struggling to get by in a tough economy.
Sales of cigarettes and other tobacco products also comprise a substantial portion of business for hundreds of small retailers in Rhode Island. The National Association of Convenience Stores reports that cigarettes account for about one out of every three dollars of total sales nationwide at their establishments. Reversing some of the harmful tobacco tax hikes of recent years could help these businesses attract some of the consumer activity that may have migrated across state lines to stores in Massachusetts or Connecticut, which place lighter burdens on a pack of cigarettes.
Furthermore, existing tax policy contributes to intensified illegal activity that is expensive to combat. Governor Chafee’s budget calls for increased spending on tobacco enforcement, citing underground sales that go untaxed due to Rhode Island’s already harsh rates. In one such incident, an individual allegedly bought cigarettes in low tobacco-tax South Carolina, North Carolina, and Virginia to resell in high-tax Rhode Island. But instead of addressing the root cause of inordinately heavy taxes, the Governor proposed an even higher excise rate, which would cost taxpayers an estimated $1.6 million per year.
Rhode Island already levies the second-highest cigarette tax in the nation. Rather than adding to this burden by boosting a regressive tax, we urge you to enact H.B. 7639. Doing so will lighten the load on the poor, lower costs for small business, and reduce the state’s reliance on unstable sources of revenue.
Sincerely,
Brent MeadState Government Affairs Manager