A Philadelphia City Council hearing on legislation that would impose a new excise tax on smokeless tobacco products, cigars, and other tobacco-related products, originally scheduled for today, has been postponed.
The proposal to impose a local excise tax on smokeless and other tobacco products was introduced by Councilman Darrell Clarke in April, at the same time that support for Mayor Nutter’s soda tax and trash fee proposals began deteriorating. Clarke’s bill would tax cigars at 3.6 cents per ounce and would tax smokeless and pipe tobacco at a rate of 36 cents per ounce. This measure is an ineffective and misguided approach to addressing the serious fiscal challenges facing what is already the most highly taxed city in the U.S.
The $6 million that proponents estimate the new tobacco tax would generate amounts to less than half of one percent of the city’s projected $150 million deficit. Projections that Clarke’s new tobacco tax will generate even this paltry sum are based in large part on that which catapulted our current president into the White House: Hope. As DC officials discovered last month, tax increases on tobacco products have a poor history of meeting revenue projections, especially in locales surrounded by lower tax cities, towns and states, as is the case with Philadelphia.
The Philadelphia City Council put city retailers at a competitive disadvantage just last year when they increased sales tax paid in city limits by more than 14 percent. With the city’s sales tax now a third higher than surrounding suburbs, there is already plenty of incentive, especially for those that commute into the city to work, to make their purchases elsewhere.
Councilman Clarke’s attempt to impose a new discriminatory tax on cigars and smokeless tobacco products will only exacerbate this incentive to avoid Philadelphia’s onerous tax burden, to the detriment of city coffers and small businesses. Fortunately, unlike last year, voters will have the opportunity in a few short months to hold accountable those lawmakers who vote for more unnecessary and ineffective tax increases in the middle of an economic downturn.
The Philadelphia City Council’s hearing on Clarke’s tobacco tax bill has been rescheduled for May 13 at noon.