3 states seek to kick habit of raising cig taxes | Cigarettes Blog

Saturday, March 19, 2011

3 states seek to kick habit of raising cig taxes

As some states look to tobacco tax increases to plug budget holes, a few are bucking the national trend and saying, "If you smoke 'em, we got 'em," looking at dropping the rate to boost cigarette sales.

In New Hampshire, supporters argue that reducing the tax by a dime would help the state compete with Maine, Vermont and Massachusetts, while opponents say it would still lose millions of dollars even if higher sales resulted.
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Rhode Island's bill would cut its tax by $1, to $2.46 per pack compared with $3 in neighboring Connecticut. New Jersey last year considered reducing its tax 30 cents, to $2.40 per pack, but hasn't followed through.

When states raise the tax, revenue goes up even though sales decline, Chaloupka said. Over time, tobacco tax revenues gradually drop after a tax hike as smoking use declines, he said. To drive revenues back up, states have raised taxes again.

The only time tax revenues dropped after a state raised its tax was in 2006, when New Jersey raised its rate 17.5 cents, he said though the revenue decline was more likely due to adoption of a comprehensive smoke-free policy.

New Jersey raised the tax 12.5 cents in 2009 and revenue rose, he noted.

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