Democrats raised the cigarette tax to raise revenue in their race to the bottom with neighboring states. And back in April I pointed out what every conservative already knows; that raising the tax will cost the state money.
Raising cigarette taxes will reduce overall revenue from that tax, decrease visits, lower average purchases per visit, provide no secondary or tertiary retail advantages, and give people fewer reasons to visit our state to buy other items. This will just exacerbate the deficit problem by eroding revenues further, just like the scores of the other tax and fee increases we’ve enjoyed under the tenure of the Lynch administration
In this mornings Nashua Telegraph, in one of those “not worth a whole article” News digest blurbs , we learn that the good people of Maine are smoking more and buying their cigarettes in New Hampshire less. The theory goes that the increase in the New Hampshire cigarette tax has reduced the price benefit to the point where it is no longer worth making a special trip. There’s no way to know exactly how much it will cost New Hampshire but according to the blurb Maine sales are up 20%. (TWENTY PERCENT!)
Here’s what else I said back in April…
If Governor Lynch wanted to demonstrate visionary leadership in the course of revenue mining, he’d propose a significant cut in the cigarette tax. I mean a significant cut. A potential savings per pack of a dollar or more would translate into heavy traffic to border stores around the state. The larger the cut the farther people would drive to benefit from it. Consumers making the trip would spend that savings and more on lottery tickets, beer, liquor, soda, and a host of other items whose price advantage are much more attractive once they are already over the border. That translates into increased visits for retailers, a larger average purchase per visit, and secondary and tertiary purchases for gas and other goods to the surrounding community.
Increased retail traffic has the fortunate side effect of creating an environment that attracts investment in the form of more retailers seeking to profit from that traffic. This creates more choices for consumers, price competition, competition for the available wage pool, and wage growth to hire and maintain staff. This attracts more residents, which leads to more purchases in a larger range of retail and secondary markets nearby, more profits all around, and more revenue for the state, all from lowering taxes.
Saving ten dollars a carton is significant. Smokers would travel from all accross New England to by a case (or cases) of cigarettes to save some serious cash. (You would think that being addicted to spending, democrats would get that.) They would buy also gas, and other items to avoid a sales tax. It’s actually very simple. And if we cut taxes the entire New Hampshire border would look more and more like the western side of the Berlin Wall before they tore it down; a bright shiny inviting slice of freedom visible from the other side–only this one from the oppression of poorly run governments that overtax everything only to tax it more when it fails to raise the funds promised.
So how about this. Instead of a race to the bottom, where we simply continue to raise our taxes a little bit everytime they do, why not take the high road and start a price war in the other direction? Lower the tax so much that neighboring states have to rethink their own tax policy to compete with the one thing they will never completely control–human nature.
I don’t think they can do it. Of course without new political leadership on this side of our border, neither can we.