Facing a $345 million overspending problem, Utah Governor Jon Huntsman proposed increase the cigarette tax by $2.30 per pack – the largest single tax hike on cigarettes in the nation’s history. The proposal would also give Utahans the highest cigarette tax in the country.
In response, ATR sent a letter to all Utah legislators and the Governor expressing opposition to the tax hike. Click here to read the letter.
Below is ATR’s press release on the Governor’s proposed tobacco tax.
Facing $345 million in overspending this year, Utah Gov. Jon Huntsman (R) has proposed increasing the cigarette tax from $0.70 to $3.00 per pack. If passed, the governor’s proposal would be the largest single tax hike on cigarettes in the nation’s history and would give Utahans the highest cigarette tax in the country. The proposal will also do little to make up the state’s budget shortfall and will likely increase illegal smuggling of cigarettes across state lines.
Under the Governor’s proposal, the $2.30 cigarette tax hike would be partially offset by eliminating the state’s grocery tax, currently set at 1.75%. However, the cigarette tax hike is expected to raise $150 million, far above the estimated $75 million revenue cut from the grocery tax, making the proposal a net tax increase. As such, the proposal is a violation of the Taxpayer Protection Pledge, a Pledge that fourteen Utah lawmakers have taken to oppose any and all tax increases, unless the tax hike is accompanied by a tax cut of an equal amount to make it revenue neutral.
“Trying to sell a tax hike as a tax cut on groceries is simply disingenuous,” said Grover Norquist, president of Americans for Tax Reform. “Governor Huntsman’s proposal will result in drastically higher taxes on Utah consumers to make up for hundreds of millions of dollars in government overspending this year.”
The tax hike proposal will push Utah’s current tax rate far beyond that of neighboring states, resulting in illegal smuggling of cigarettes across borders and reducing actual tax revenue to levels far below projections. After Maryland raised the tobacco tax last year, the state saw a 25% drop in cigarette sales and a sharp decline in cigarette tax revenue from consumers who purchased products in nearby states with lower rates. During the first half of last year, Maryland also recorded a 254% increase in illegal cross-border cigarette smuggling, mostly because Maryland’s cigarette tax rate is $1.70 higher than neighboring Virginia. Gov. Huntsman’s proposed cigarette tax is $2.04 per pack over the neighboring state average of $0.96.
“Such a drastic increase in Utah’s cigarette tax will surely drive consumers to surrounding states with lower rates,” added Norquist. “Tax rates may be contained within state borders, but consumer decisions are not. Far too often, smokers are unfairly targeted to cover state overspending problems and they respond by simply finding cheaper products elsewhere.”
For a PDF version of the press release, click here.