On behalf of National Taxpayers Union’s 6,600 members in Oregon, I urge you to oppose the 85 percent cigarette tax hike found in HB 2275, as well as HB 2870, which would allow counties to impose even higher rates. Raising the cigarette tax from $1.18 to $2.18 or more per pack would disproportionately burden low-income Oregonians and hurt small retailers while providing an unreliable stream of revenue.
The prospect of a tobacco tax hike is very troubling to NTU’s members. Since the poor are more likely to smoke, Oregon’s low-income families would be hit hardest by the proposal. A 2007 study by the Heritage Foundation showed that more than one-fourth of people who smoke live below the federal poverty line and another quarter of all smokers live within 100-200 percent of the poverty line. Raising the cigarette tax would place a heavier burden on these families, who are struggling to get by in a tough economy.
Tobacco tax hikes would also harm small businesses. 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. The proposed hike is certain to drive more dollars out of the state, as more Oregonians would head to states with lower cigarette taxes, like nearby Idaho, Nevada, and California. While shopping out-of-state, consumers are also likely to purchase gas, food, and other items that help to grow state economies.
Additionally, evidence from other states casts serious doubt on the assumption that higher tobacco taxes would necessarily lead to greater revenue. For example, New Jersey reported a $52 million shortfall in revenues after it raised its cigarette tax by 17.5 cents. Other states, including Arkansas, Maryland, Mississippi, and Rhode Island, have also reported gaps in expected revenues following tobacco tax hikes.
With higher federal tax rates and soaring health care costs, your constituents would be best served by tax policies that emphasize fiscal discipline and economic prosperity. As such, I hope you will oppose tobacco tax hikes that would harm smokers and non-smokers alike.Sincerely,Lee SchalkState Government Affairs Manager