Study Finds Tobacco Taxes Cause, Don’t Fix, Fiscal Problems - Granite Grok

Study Finds Tobacco Taxes Cause, Don’t Fix, Fiscal Problems

extinguish tobacco taxesSearch GraniteGrok for “Tobacco” or “Tobacco Tax ” or “Cigarette Tax” and you’ll find reams of links and data that demonstrate why raising the tax in New Hampshire won’t do any of the things claimed and how leaving it alone or lowering might be a better idea.

Add this Report to that..“Tobacco Taxes Don’t Fix Fiscal Problems.”

What they actually do is lead to more taxes.  Between 2001 and 2011, 67% of tobacco tax increases were followed by other tax increases.  In 70% of the cases the increases failed to produce the promised revenue.

If that’s not bad enough, check this out.

The higher a state’s tobacco taxes the more likely it is to tax more of everything else and (coincidentally?) have weaker economic growth.

States with high cigarette tax rates have tax burdens an average of $1,356 above the national average. NTUF’s study actually found that the correlation between a state’s overall tax burden and its cigarette tax rate went both ways;  states with lower cigarette taxes have lower overall tax burdens.

  • The tax pressure on residents of high-cigarette tax states was 39.4 percent heavier than the U.S. average in fiscal year 2010.
  • On the other hand, when analyzing the 15 states with the lowest per-pack cigarette tax in the nation, the total tax burden was $892 below the national average – or 21.6 percent less.

These types of tax increases are not associated with strong economic growth. States that hiked their tobacco taxes in some way in 2009 tended to have slower Gross State Product (GSP) growth over the following two : they grew at an average rate of 1.34 percent, compared to the U.S. average of 2.43 (a 1.09 percent lower growth rate).

I have argued at great length and for many years, that the Democrats (and some Republicans) desire to increase the tobacco tax does not reduce teen smoking in NH, does not raise revenue (long term), results in more tax increases, and puts a damper on the New Hampshire advantage–from which we can increase growth through commerce by having a more favorable retail climate and potentially more revenue, without necessarily affecting health outcomes in the state because we sell to folks in other states who come here by choice to save money.

I have argued that insisting the higher tax will reduce smoking–even if we were not honest about whether that would even work–should, by design, eventually reduce that revenue to zero making it a tax we should not rely on for anything important; we should be lowering it to optimize revenue potential from cross-border sales with an eye toward not relying on it for much of anything important at all if ending smoking is the progressives end game.

My plan would probably produce more revenue from tobacco for more years, for whatever purpose, but even if it didn’t why would you argue that New Hampshire’s most vulnerable need more tobacco tax revenue when the goal is to end smoking by making it too expensive through taxation, thus ending the revenue stream in the process?  Were Democrats planning to screw over the most vulnerable all along?  My plan actually feeds more money into their supposed narrative.

And I think we can see from this study that tobacco revenue really is a dead end.   Raising it has more negative than positive outcomes all around.  In the end it is simply a tax that can be raised, to which tax and spenders flock when they feel the need to raise a tax.   Bad for revenue, bad for growth, two things New Hampshire was in action when Democrats went on their taxation binge from 2007-2010.  All it really did was encourage them to spend more, adding debt, bonding debt, to which Democrats only call is….even more taxes.

And why not?  No matter how they wreck an economy, it’s you rmoney, not theirs.

>