The New Hampshire House Ways and Means Committee recently passed to the floor HB 156, which would reduce the cigarette tax by 10 cents per pack in addition to reducing the excise tax on other tobacco products. This would bring the regressive cigarette tax to $1.68 per pack, enhancing New Hampshire's competitive advantage in the region at a time when many nearby states, most notably New York, have opted to increase their levy.
This is good news for convenience stores, who attribute roughly one-third of their sales to cigarettes. During tough economic times, these job providers need all the help they can get to meet payroll and add jobs.
It makes sense for state government, too. Tobacco taxes are inherently unstable sources of revenue, and it is a rare occurence for a state to realize the projected revenue after raising the tax. In fact, economists at the University of Southern New Hampshire recently published a study that showed that HB 156 would actually increase revenues by $13 million. With an overspending problem approaching $1 billion, this will help New Hampshire balance the books.
In a letter to the New Hampshire Legislature, ATR President Grover Norquist wrote:
The dynamic impact of targeted excise taxes is well-documented. Between 2003 and 2007, only 16 of 59 cigarette tax increases at the state level met their revenue projections, as higher levies discouraged tax-paid consumption. But New Hampshire has an opportunity to go in the opposite direction. A recent study shows that HB 156´s 10 cent-per-pack cigarette tax cut could generate an additional $13 million in revenue for state government.
To be sure, ATR generally does not cheer revenue increases. New Hampshire’s $900 million budget hole is the product of Gov. Lynch’s overspending problem. But it is encouraging to see New Hampshire elected officials coming to terms with the dynamic impact of tax reform. By lowering the tobacco tax burden relative to other New England states, New Hampshire is luring consumers to purchase not only tobacco, but the food and gasoline they will purchase during their trip.
The bill now heads to the House floor. To see Grover's entire letter to the legislature, see below.
March 1, 2011
New Hampshire House of Representatives
New Hampshire SenateDear Legislator,
I write to urge your support of House Bill 156, which would reduce excise taxes on cigarettes and other tobacco products. This is an opportunity to widen the tax gap between New Hampshire and the rest of the Northeast, further encouraging consumers to cross state lines to support the Granite State’s small business community.
The dynamic impact of targeted excise taxes is well-documented. Between 2003 and 2007, only 16 of 59 cigarette tax increases at the state level met their revenue projections, as higher levies discouraged tax-paid consumption. But New Hampshire has an opportunity to go in the opposite direction. A recent study shows that HB 156´s 10 cent-per-pack cigarette tax cut could generate an additional $13 million in revenue for state government.
To be sure, ATR generally does not cheer revenue increases. New Hampshire’s $900 million budget hole is the product of Gov. Lynch’s overspending problem. But it is encouraging to see New Hampshire elected officials coming to terms with the dynamic impact of tax reform. By lowering the tobacco tax burden relative to other New England states, New Hampshire is luring consumers to purchase not only tobacco, but the food and gasoline they will purchase during their trip.
And New Hampshire is not alone in this pursuit. Whereas the Northeast has been known for years as a region in perpetual competition for higher tax increases (see David Patterson’s New York vs. Jon Corzine’s New Jersey), the tide is shifting. Maine’s Paul LePage is acutely aware of the competitive disadvantage his state has relative to New Hampshire and is working to cut taxes on tobacco, income and other areas. You have the opportunity with HB 156 to move first.
It is time to give New Hampshire’s small business community a break. Convenience stores are struggling to make payroll as a consequence of the economic downturn. Nationally, tobacco sales represent roughly one-third of their sales; a significant tax cut would provide a boost to their bottom line.
It is encouraging to see the conventional wisdom shifting in the New Hampshire Legislature. I urge you to see this proposal through to the governor’s desk. HB 156 is sound public policy that will spur the economy while weaning state government off an unstable revenue source. I urge you to support this tobacco tax cut in order to maintain an economically competitive New Hampshire.
If you have any questions about ATR’s support of HB 156, please contact state affairs manager Joshua Culling at [email protected].
Onward,
Grover Norquist