New Hampshire Bucks Trend With Bill to Lower Cigarette Tax
CONCORD, N.H. -- This past summer, New York state lawmakers increased the cigarette excise tax to more than $4.35; West Virginia legislators are debating a bill that would raise its levy by $1 per pack; and a Nebraska state senator has proposed more than doubling that state's cigarette excise tax. But despite these headlines not all states are exploring the option of raising the levy -- whether to help balance the budget or pay for rising healthcare costs. New Hampshire is one of those states.
The state's House Ways and Means Committee is currently discussing HB 156 which would decrease the cigarette tax 10 cents, from $1.78 per pack to $1.68. The committee held a meeting to discuss the issue on Feb. 8; however, the chairman decided to table any vote on the measure so members could further weigh the pros and cons.
One key factor the members will review further is a new economic study, conducted by Dr. Gregory Randolph and Dr. William Tasto, both economic professors at Southern New Hampshire University, and William. D. Keip of Keip Government Solutions, which found that reducing the state's cigarette excise tax by 10 cents per pack would generate up to $13 million in additional tax revenue for the state. The study was commissioned by the New Hampshire Grocers Association, which represents convenience stores, supermarkets and neighborhood stores, and their suppliers.
"The bill is still in committee. It was tabled because of our study. It was so expansive and had so much information," explained John Dumais, president and chief executive officer of the New Hampshire Grocers Association. In fact, Dumais testified before the committee on Feb. 8 and was invited back, along with Tasto, when the committee reconvenes. A date has not be set as of yet, but Dumais expects it to be in the next couple of weeks.
According to the study, approximately 50 percent of cigarette sales in New Hampshire are generated by purchases from smokers in bordering states. Currently the per-pack tax sits at $2.51 in Massachusetts, $2 in Maine and $2.24 in Vermont.
The plan to decrease the cigarette excise tax at a time when it seems every lawmaker across the country is doing the opposite is not new in New Hampshire. Dumais said the proposal was suggested several times before, but that the state legislature had a different make-up then. However, with a new slate of legislators in office things may change.
"The economics of it is that every time you increase the tax you lose other related revenue," Dumais explained.
The study takes a look at two scenarios: what would happen if the state raised the levy by five to 10 cents and what would happen if the levy is decreased by five to 10 cents. And what the analysis found, according to Dumais, is that lowering the tax would actually bring in more business.
"Our analysis says that when people come from as far away as New York to New Hampshire they buy other products," he said. "They fill their gas tanks, they eat and they buy beer or liquor because we have very low liquor prices." In addition, some out-of-state consumers may even stay the night, he added.
"We need to be looking at the overall shopping basket," Dumais explained.
In addition to the question of revenue, increasing the cigarette excise tax could have unwanted consequences, Dumais said. For example, such a move could increase Internet sales which make it easier for underage smokers to buy cigarettes. And then there is the "dangerous impact" of black markets, he added.
So far the legislature has been receptive to the idea of not just lowering the cigarette levy, but the levy on other items as well, Dumais said. "We have a new legislature in place, and it is now looking at a lot of tax items," he said. "It is looking at ways to reduce the tax on products and still increase revenue."
New Hampshire is not alone on this side of the issue. In Rhode Island, state lawmakers are debating bill H 5158, which would reduce the cigarette excise tax by $1 per pack, In addition, bills to reduce the levy have been introduced in Oregon (House Bill 2110) and New Jersey (Assembly No. 2590).