From: SMOKEFREE@compuserve.com
Date: Wed, 07/02/08
Mass. cigarette tax jumps $1 per pack
By STEVE LEBLANC
Associated Press
07.01.08, 6:25 PM ET
http://www.forbes.com/feeds/ap/2008/07/01/ap5175047.html
BOSTON - The tax on a pack of cigarettes in Massachusetts will jump by a
dollar under a bill signed into law by Gov. Deval Patrick.
The tax, one of the highest in the nation, goes into effect immediately.
Patrick signed the bill Tuesday, a day after House and Senate lawmakers
rushed to approve the bill by the start of the new fiscal year.
The increase brings Massachusetts' cigarette tax to $2.51 per pack. New
York has the highest cigarette tax in the nation at $2.75 per pack.
Supporters say the tax increase would help raise $174 million in revenues..
They say the extra money will go to help cover the cost of the state's
landmark health care law.
They also defended taking up the final version of the bill one day before
the tax was intended to take effect.
Opponents say the measure unfairly targets one group of people and will
hurt small Massachusetts businesses that sell cigarettes close to the New
Hampshire border.
The House approved the measure by a 93-52 vote after a brief debate and
sent the bill to the Senate, where it was also approved by a 26-9 vote
Monday.
Neighboring states are also eyeing higher cigarette taxes, though not as
dramatic an increase.
Vermont's cigarette tax rate climbs by 20 cents to $1.99 per pack effective
Tuesday, a jump that follows a 60-cents-per-pack increase in 2006.
New Hampshire's cigarette tax, now $1.08 per pack, is slated to jump to
$1.33 in October if it doesn't generate at least $48 million in revenues
between July and October.
Some Massachusetts stores had begun collecting the tax earlier in the day
on Monday anticipating that Patrick would sign the bill into law.
Anti-smoking advocated hailed the new tax.
"Increasing the tobacco tax is one of the most effective tobacco control
strategies with the impact on our youth undeniable," said Marc Hymovitz,
spokesman for the American Cancer Society. "The effect of this tax increase
will be an estimated 25,000 smokers quitting and 46,000 youth never
starting to smoke."
- - -
Taxing Tobacco
By John P. Gregg
Valley News
6/29/08
http://www.vnews.com/06292008/4919565.htm
West Lebanon -- Smokers in Vermont and New Hampshire are bracing for
another hit to the pocketbook this year as both states plan on raising
taxes on tobacco.
But as the tax rates per pack go even higher -- and the number of smokers
gradually declines -- tobacco may eventually burn out as a reliable revenue
source for cash-strapped states.
In Vermont, the tobacco tax rate is slated to rise by 20 cents to $1.99 per
pack on July 1, the second-part of a two-step increase in the tobacco tax
to help pay for the Catamount Health program. State taxes went up 60 cents
per pack in 2006 in Vermont when the Catamount Health program was first
passed into law.
And Vermont also applies its 6 percent sales tax to tobacco, while New
Hampshire has no sales tax.
In New Hampshire, smokers currently pay $1.08 per pack in state taxes, but
could face a 25-cent increase in October if tobacco revenues under the
current rate don't generate at least $48 million between July and October..
On top of the state taxes, the federal cigarette tax is 39 cents per pack..
While Vermont has geared its tax rate to help pay for a health program, New
Hampshire's significantly lower tobacco tax has been set, in part, to
continue to draw purchasers from nearby states, where taxes are higher. The
higher cost of cigarettes has also been shown to discourage some smokers,
though not all, by any means.
"Certainly, raising taxes on cigarettes is good public policy if you are
trying to curb smoking. I think it's one of the things that has probably
led to the decline in cigarette sales statewide," said Dennis Delay, the
deputy director of the New Hampshire Center for Public Policy Studies. "But
- I think the state is stuck between wanting to discourage smoking in
public places and still relying on cigarettes as a revenue source, and I
think that source will become perhaps not as stable as it has been going
forward."
Steady Decline in Sales
In fiscal year 2006, for example, New Hampshire generated almost $151
million in state revenues from tobacco taxes, when the tax rate was 80
cents per pack, selling an estimated 188 million packs.
For fiscal year 2008, which ends June 30, the state expects to collect $170
million under the $1.08 tax rate, meaning sales of about 157.4 million
packs.
In Vermont, the number of packs sold in the state peaked in the early 1980s
at about 84 million packs, and has been declining at a rate of about 3.7
percent per year since then, according to Jim Reardon, the commissioner of
the Vermont Department of Finance and Management.
For fiscal year 2008, officials in Montpelier expect Vermont retailers to
sell about 32 million packs of cigarettes, generating about $59.1 million
in tobacco tax revenue.
The Green Mountain State's tobacco revenues have been relatively flat for
several years. In fiscal year 2004, for example, tobacco taxes brought in
$53.4 million to Montpelier.
Though revenues are expected to increase by 6.6 percent in fiscal year 2009
with the $1.99 per pack rate in Vermont, they are projected to decline by
3.8 percent the following year, both because of declining consumption, tax
rates in competing states, and the fact that the new tax rate will have a
one-time application to existing floor stock in fiscal 2009.
"We should expect a declining trend in revenues to take over in 2010 and
continue beyond," Reardon said.
Smokers, and merchants, in both states are keenly aware of the tax
implications.
Rich Houle, the manager of The Beverage King in West Lebanon, which does a
steady trade in cigarettes, said business picked up in 2006 when Vermont
dramatically increased its tobacco taxes.
"Two years ago, when Vermont started going up on its taxes, that's when it
started picking up here," Houle said.
Chris DeGrasse, owner of E&S Country Store in Wilder, said being in Vermont
put him at a disadvantage when it comes to cigarette sales.
"It's hard being a border store trying to compete,” he said. “(The state)
is looking for revenue, but yet you are going to sell less packs because
the tax is higher."
States Compete for Sales
Although state governments note that smoking leads to a variety of health
problems, which increase expenses for government programs such as Medicaid
and Medicare, smokers leaving The Beverage King said they were frustrated
by the continued increase in tobacco taxes.
"It's just an excuse. They are filling their pockets is what they are
doing," said Mike Ordway, a truck driver from Vershire who bought a pack of
cigarettes at The Beverage King. "I usually try to come to New Hampshire.
It's a little bit cheaper, and if you can come to these places, you can cut
it in half on price."
New Hampshire's tax rate is carefully calibrated to make the Granite State
more competitive than nearby states.
The tax rate in Massachusetts, for example, is $1.51 per pack, almost 40
percent higher than the New Hampshire rate, and lawmakers in the Bay State
are thinking of increasing the tax by $1 more per pack.
Maine's cigarette tax is $2 per pack, and New York state now charges $2.75
per pack, the top rate in the nation, according to the Campaign for
Tobacco-Free Kids. (Reardon acknowledged that the higher New York rate "may
encourage" some upstate residents to cross the border and buy cigarettes in
Vermont, even with the higher tax rate taking effect on Tuesday.)
About 18 percent of adults in Vermont and Massachusetts are smokers,
according to Delay, as is 18.7 percent of the adult population in New
Hampshire.
"I think the expectation, obviously, by the Legislature is that as long as
the New Hampshire tax is kept relatively less than the other states around
us, then tobacco tax revenues will still be largely stable," Delay said.
"The long-term implications are that fewer and fewer people are going to
smoke, generally, and the expectation is that that's going to become not as
large a part of state revenues as it has in the past."
Tobacco revenues represent about 7.6 percent of the money brought in for
New Hampshire's education fund and general fund, Delay said.
State Rep. Susan Almy, a Lebanon Democrat and chairwoman of the House Ways
and Means Committee, said New Hampshire clearly has set its tax rate to
lure smokers from other states, but that the soaring price of gas may
discourage people from as far away as Connecticut from driving north for
the lower prices.
"We sell a lot more cigarettes than we smoke, and the question is how far
we've gone down on that curve because of the price of fuel," said Almy, a
progressive who would rather the state was using tobacco revenue to
discourage smoking.
"I would rather not be funding the government by (relying on) cigarette
taxes unless we're going to be putting the money back into preventative
activities (to get smokers to quit), but I've only got a small say in
this," Almy said.
New Hampshire does go to great lengths to ensure that it receives the
tobacco tax it is due. For several years, the state, thanks to a federal
law, has been obtaining the names and addresses of New Hampshire residents
who buy cigarettes over the Internet (where dealers don't collect state
taxes) and then sending letters to the smokers, notifying them of the state
taxes due, Almy said.
Many smokers are also switching to bags of loose tobacco, which, though
taxed, prove much more economical.
There are 20 cigarettes in a pack, and 10 packs to a carton, and Houle said
cartons at The Beverage King range from $27.99 to more than $50 per carton,
including taxes.
By contrast, large bags of loose tobacco sold for as low as $12.59, and the
McClintock brand used the slogan "Make your own and save."
That suggestion has appealed to John Messier, a floor installer from
Bethel, who used to smoke Camel Filters but switched to loose tobacco a few
years ago to save money.
"I've been doing this for a couple of years. It's a lot cheaper," said
Messier, who bought a bag of Old Hillside No. 2 tobacco at The Beverage
King. "It's a lot cheaper. It costs $18 and it lasts me a month. A carton
of cigarettes, I go through in a week."
Reardon, the finance commissioner in Vermont, said the increasing price per
pack will "have a negative effect on cigarette consumption," a trend he
said he welcomes.
"If there is a revenue decline in tobacco, that has a correlation with less
people consuming tobacco products. That is certainly a revenue problem I'd
like to have, because that's a positive outcome," Reardon said.
But Messier, the Bethel floor-installer, said many smokers are going to be
determined to continue their habit, and will make other sacrifices to do
so.
"I think people are still smoking just as much, giving up other things so
they can smoke," he said.
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