Tobacco increase debated in Senate
The governor in her budget plan is counting on $30 million from increases in the tobacco tax. I doubt it will happen.
Across the country, raising tobacco taxes has been easy pickings for many governors and state legislatures. Here in New Hampshire, the tax on cigarettes went from $1.08 per pack to $1.33 in 2008 and in 2009 it was raised again to $1.78 per pack.
Two years ago, the grocers’ association worked with the House leadership to roll back the tax by 10 cents. The highly suspect rationale was that a 10-cent cut in price would increase sales and thus increase tobacco tax revenue. Many of us shook our heads at the idea that a tiny 10-cent cut would drive up sales of a product that sells for over five dollars.
The price reduction did not matter much. Shortly after the cut went into effect the major tobacco companies raised their prices nationally by 10 cents. And, tobacco revenues have not met budget goals in either year of the biennium. By law, that means we will automatically go back to the $1.78 tax on July 1 when the next biennium begins.
Revenue from the tobacco tax is important. This year it is budgeted to produce $219 million or about 10 percent of our general and education trust fund income. Through March, tobacco tax revenue was behind budget by $8.8 million.
Last Tuesday, the Senate Ways and Means Committee heard testimony on House Bill 659 that would raise $20 million annually by increasing the tax on cigarettes by 20 cents per pack over and above the soon to be $1.78 level. There was plenty of testimony from convenience store owners including the major chains like Cumberland Farms that increases in the tobacco tax drives away business. Stores on the Massachusetts border say our lower priced cigarettes bring millions of dollars of sales from Bay State buyers who travel considerable distances to buy in New Hampshire. Any increase in the tobacco tax, critics said, will hurt cigarette sales and reduce purchases of other products in other stores.
On the other side is the concern for health. Tobacco, we know, causes cancer and other diseases. It is an unhealthy product. Sales, and especially sales to young people, are impacted by the price of a pack of cigarettes. The New Hampshire Medical Society argued for a 68 cents per pack tax increase, much more than the governor’s proposal. The society’s point is that raising the tobacco tax will lower consumption and thus reduce state Medicaid costs for illnesses caused by tobacco use. They report that New Hampshire has 174,000 smokers leading to 1,700 tobacco related deaths each year. Today, just 19.4 percent of New Hampshire adults smoke. But, and this is important, 57 percent of adults on Medicaid smoke. That means that those who are poor and receive medical care paid for by the state and federal government are almost three times more likely to smoke than the overall adult population.
For almost a decade, M. D. Anderson Cancer Center in Houston was a fund-raising client of mine. At meeting after meeting with donor prospects, this question was raised: “What is the one thing you would do to reduce cancer?”
And the answer always was: “End tobacco use now.”
The Senate will weigh the health benefits of increasing the tobacco tax and the need for revenue against the anti-tax attitude I sense in the Senate today. As we scramble to match revenue with expenditures in the budget building process, I doubt new revenue from an increased tobacco tax will be accepted.
Good news, though, is that cigarette smoking continues to decline. Measured by tax stamps sold, which is how we tax cigarettes, packs sold have been declining about four percent annually.
Bob Odell, a Republican, is the New Hampshire senator representing Antrim, Bennington and Francestown, among other towns.