N.H. Cigarette Tax Cut Failing to Boost Sales

CONCORD, N.H. -- New Hampshire's reduced cigarette tax, implemented in June, has failed to boost revenue through increased sales during the first four months of the fiscal year, according to a Nashua Telegraph report.

During this time period, the state collected $77.5 million, which is $3.5 million or 4.3 percent less than legislative budget writers had predicted. Last fiscal year, New Hampshire collected $84 million during the first four months.

The New Hampshire Legislature cut the state's cigarette tax by 10 cents down to $1.58 per pack in June, following years of the New Hampshire Grocers Association's claims that a cut would boost sales. Economists hired by the grocers predicted an increase of $13 million in revenue, while economists working for anti-tobacco groups predicted a decline of $9 million, according to the report.

Last month, the state saw an especially deep plunge as it collected only $16.4 million in cigarette taxes, down 14 percent from the monthly pace.

When the tax cut first took effect, it was difficult to determine whether it had a negative effect on revenue, or if retailers were simply buying bonds for wholesale cigarettes instead of paying in cash. But now the conclusion is clear, according to Administrative Services Commissioner Linda Hodgdon. "There's no arguing with the numbers, and they are pretty firm right now," she said.

From June through October, the state issued 55.7 million tax stamps for cigarette packs, compared to 57 million tax stamps during the same time period last year. Tobacco sales in New Hampshire have gone down steadily as more people quit smoking; five years ago, 71.5 million tax stamps were issued during the June-October window.

Rep. Susan Almy (D-Lebanon) criticized the tax cut, saying the state should assist people in quitting smoking, not encourage them to purchase more. "Back in June when the state budget passed, Democrats warned cutting the cigarette tax by 10 cents a pack would have a negative effect on state revenue. The reduction was just a political ploy by the Republicans," said Almy in a statement. "I think if you asked citizens around the state, they would agree that it wasn't a good idea to make college more expensive and cigarettes cheaper."

Overall, New Hampshire has taken in $10.9 million in revenue over projections, according to the report.