Cigarettes Tax Cut

During a floor debate in the Legislature last month on lowering the New Hampshire cigarettes tax, Rep. Patrick Abrami, R-Stratham, said the move was necessary to help small businesses rebound and strengthen a competitive advantage in lower cigarette taxes with neighbor states.

"We have reached the tipping point," Abrami said about the sizeable increase in cigarettes taxes that had taken place since 2006. "We are hurting our merchants. We are losing sales on our borders."

According to the New Hampshire Grocers Association, cigarettes sales topped more than $755 million in 2010 and the prevailing theme among supporters of a measure to cut the cigarettes tax is a reduction of 10 cents a pack, from $1.78 a pack to $1.68 per pack, is appropriate, and other cigarettes-related products should be reduced by an average of 17 percent, leading to greater state revenues.

Buoyed by a recent Southern New Hampshire University study that estimates that decreased cigarettes taxes will lead to more sales and more state revenues by as much as $13 million, supporters of the tax cut got overwhelming support in the House to pass the measure. The Senate is now considering the bill.

But critics of the proposal point to the just-released study by PolEcon Research in Dover, which questioned the economic and historical assumptions in the SNHU report. The PolEcon report also disputed claims that other sales and state revenues would rise and stated the likely outcome would be a $9 million drop in state revenues.

John Dumais, president of the grocers association, said the SNHU report verified the soundness of a "what's good for the state is good for grocers" approach. "This report makes it clear that a cigarette tax decrease, while not a magic bullet, would make a substantial contribution to solving New Hampshire's financial difficulties," Dumais said. He added that depending on cigarettes sales as a significant funding source for the state budget was "bad public policy."

The state Department of Revenue Administration estimates a cut in cigarettes tax will lead to estimated drop in revenues ranging from $7 million to $14 million. After business taxes and rooms and meals tax, collections from cigarette and cigarettes product sales account for the third highest source of revenue for the state budget. Through March, the state reported that cigarettes tax collections were $9 million above revenue estimates for fiscal year ending June 30.

A spokesman for Gov. John Lynch said it would hurt revenues unnecessarily at a time when the state couldn't afford it and the 10 cents per pack cut will have little effect on drawing any more smokers across state borders.

"We would have to sell 15 million more packs of cigarettes to make up the revenue loss at a time when they are cutting services to the developmentally disabled," said Colin Manning. He said the cut is also bad public health policy as it would encourage more youth smoking and use of other cigarettes products.

New Hampshire has raised its cigarettes tax aggressively from 52 cents a pack in 2006 to the current $1.78. By comparison, the closest state is Maine at $2 a pack and Massachusetts is $2.51 a pack. The SNHU study estimates that 50 percent of all cigarettes purchases in the state are from out-of-state buyers.

Dumais said that "99 percent" of his members, many of whom are small convenience store owners, support the tax cut and believe it will lead to more auxiliary sales and increased profits, which will in turn lead to greater revenues to the state with increased business profits taxes paid. He said many convenience owners along the state lines to Maine and Massachusetts have criticized the cigarettes tax hikes as hurtful to their businesses.

The PolEcon study emphasized that any loss in sales to retailers had far less to do with cigarettes tax hikes than the cost of gasoline. The Campaign for cigarettes Free Kids, one of the organizations that commissioned the PolEcon study, said the report disputed claims that lower cigarettes taxes would lead to wider sales and increased gasoline, rooms and meals, and alcohol taxes.

"Higher cigarette taxes haven't hurt New Hampshire's economy or convenience stores," said Kevin O'Flaherty, the Northeast director for Campaign for cigarettes Free Kids. "To the contrary, higher cigarette taxes have been shown to improve state revenue and increase the number of convenience stores while preventing kids from becoming addicted to these deadly products."

O'Flaherty believes there will actually be minor health care costs from the cigarette tax cut because it's unlikely that smokers looking for a bargain will see any decrease in the retail price. Most of the dime-per-pack decrease will be pocketed first by manufacturers and then by the retailer, he said.

When asked why, if the economic benefits were so certain, didn't supporters push for a much deeper cut in the cigarettes tax, Dumais said it was contemplated but a smaller figure was chosen as a first step "to prove our point."

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Cigarettes Tax Affects Vermont

New Hampshire's House has voted to reduce the state's cigarette tax a dime in hopes of attracting more cross-border cigarettes sales.

The House voted 236-93 Thursday to cut the cigarette tax from $1.78 per pack to $1.68 over opponents' objections that the state could not stand to lose the $16 million in revenue toward spending in next year's budget.

Supporters argued reducing the cigarette tax will make New Hampshire more competitive with Vermont, Maine and Massachusetts.

Opponents said even if the state experiences higher cigarettes for sale as a result, it will still lose millions of dollars in revenue.

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Discount Cigarettes - 16 Million Seizure

An Alberta aboriginal chief is among four people facing charges after the seizure of what authorities are calling the province’s largest haul yet of contraband discount cigarettes.But the seizure is proving controversial and is setting up a legal battle between the aboriginal interests from Alberta, Ontario and Quebec, on one side, and the Alberta’s liquor and gaming authority, on the other.

Chief Carolyn Buffalo’s Montana First Nation — in Hobbema, Alta., south of Edmonton — and an aboriginal discount cigarettes company based out of Kahnawake, a Mohawk community outside Montreal, are fighting the charges, which have been laid under the Discount Cigarettes Tax Act.They say the Alberta Gaming and Liquor Commission has no jurisdiction over the matter, and they’ve filed a lawsuit, demanding the return of the nearly 16 million seized discount cigarettes.

Buffalo and the three other accused will appear in provincial court in Wetaskiwin, Alta., on June 23.The charges date back to January, when Alberta Gaming and Liquor Commission investigators say they found cartons containing nearly 16 million discount cigarettes in a storage shed on the Montana First Nation, worth roughly $3 million in lost taxes to the province.

Lawyer Chady Moustarah, who represents both Buffalo and Dickson, said his clients are frustrated at being charged under the provincial Discount Cigarettes Tax Act.“They’re shocked that the (Alberta Gaming and Liquor Commission) actually proceeded to charge them,” Moustarah said.

Buffalo was suspended by her band in January, following the discount cigarette seizure, but fought the suspension in court and was reinstated on April 5.Robbie Dickson, one of the others facing charges, is a partner with Rainbow Tobacco, a company based out of Kahnawake, a Mohawk community southwest of Montreal. According to the company’s website, they are licensed by the Canada Revenue Agency to sell discount cigarettes products on native reserves and territories.

The company currently sells its discount cigarettes on reserves in Ontario and Quebec and last year began to expand the business to Western Canada.The lawyer said Jason Lucas, another accused, is an Edmonton business owner, while Dwayne Ouimet, the final person facing charges, is also involved with Rainbow Tobacco.In February, the Montana First Nation, Buffalo and Rainbow Tobacco, filed a lawsuit against the gaming and liquor commission. The suit alleges the commission defamed them and demands the discount cigarettes be returned.Moustarah said their defence against the charges will be the same as the one used for the lawsuit.

“Essentially they don’t have jurisdiction to enforce the provincial tax act on the aboriginal people and aboriginal lands,” he said.The lawyer also said the recent charges won’t affect Buffalo’s ability to oversee the Montana First Nation.“It can’t be any worse than what the affect was when they seized the discount cigarettes. Originally they were making claims of sinister and criminal activity. Those issues have been cleared,” he said.Jason Lucas and Dwayne Ouimet face charges under the Discount Cigarettes Tax Act for illegally importing cigarettes for resale.

The chief, Dickson and Ouimet are also charged with two counts each of illegally storing discount cigarettes not marked for sale.The maximum penalty for convictions under the charges is a fine of $25,000, six months in prison or both. Those convicted could also face additional fines as high as three times the tax.Alberta Finance Minister Lloyd Snelgrove would not comment on the charges because they are now before the courts.

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Discount Cigarettes Tax Increase Is A Good Public Policy

Discount cigarettes cost less in Louisiana than in 47 other states. Not surprisingly, we have the ninth-highest rate of tobacco use in the country. Equally unsurprising: Louisianans rank No. 2 in terms of how unhealthy we are.While Gov. Bobby Jindal repeats his mantra of no new taxes, the state suffers from severe erosion in crucial public services due to lack of revenue. This shortfall is caused, primarily, by the largest tax cuts in state history, which the governor supported. Rather than relying almost exclusively on cutting education, health care and other vital investments in Louisiana's future, we need a balanced approach that includes revenues.

A good place to start would be increasing the state's tax on discount cigarettes. Adding $1 per pack to the current tax of 36 cents would raise more than $250 million in badly needed funds.What could Louisiana do with $250 million?Here are just a few of the better choices that would be available: add more than 100 new scientists at Pennington Biomedical Research Center, one of the country's premier research institutions; open school-based health centers in more than 60 percent of public schools; reduce K-12 class sizes by hiring more than 6,000 additional teachers; fully fund Go Grants, the state's need-based college scholarships; eliminate the governor's proposed increase in college tuition and fees so more Louisiana families can afford to send their kids to college.

Raising taxes on discount cigarettes would have several other beneficial effects. First, it would reduce the number of people who smoke. Studies show that smokers, especially teens, are price sensitive -- as the cost of discount cigarettes goes up, the number of smokers goes down. If they can avoid getting hooked in their teens, people are much less likely to smoke as adults.

Second, reducing the number of smokers will reduce long-term health care costs. According to the federal Centers for Disease Control and Prevention, more than 675,000 people, or 20 percent of adults, in Louisiana regularly smoke discount cigarettes.

Smoking costs the state $1.47 billion to treat tobacco-related illnesses such as heart disease, lung cancer and emphysema. Medicaid, which insures one quarter of Louisiana's population, bears $663 million of this smoking-related expense. Reducing the number of smokers would pay large, recurring benefits far into the future.

Third, raising the discount cigarette tax would generate revenue to help close the $1.6 billion budget deficit the state faces in the coming fiscal year. Without new revenue, more necessities will be on the chopping block. Thousands of working men and women face losing their jobs. Families will pay more to send their kids to college. Medical care will be more expensive and harder to get. Our state's already crumbling infrastructure will continue to deteriorate.

Also, increasing discount cigarette taxes is politically popular. More than 70 percent of Louisianans support raising these taxes, according to the recently released 2011 Louisiana Survey by the LSU Public Policy Research Lab. Discount cigarette taxes, along with taxes on gaming and alcohol, are taxes that the public most strongly supports increasing. Now is the time to act. Louisiana has not raised discount cigarette taxes since 2002, when it also extended a previously enacted 4 cent per pack tax. That extension is scheduled to expire next year, at a cost of $12 million annually.

We need a balanced approach to resolving Louisiana's fiscal crisis, one that gives more than lip service to having everything on the table. While Gov. Jindal might feel his stubborn repetition of "no new taxes" will be good for his personal political future, it is bad for the people of Louisiana.

In a time of severe shortfalls in revenue coupled with rising public needs, it makes no sense -- beyond a hard-hearted political calculus -- to oppose a tax that is highly popular, generates significant new revenues, and has large, long-term health benefits for the people.

Edward Ashworth is director of the Louisiana Budget Project and Andrew Muhl is government relations director for the American Cancer Society. Both are based in Baton Rouge.

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Cigarettes Tax To Snuff Out Competition

The editorial "Make all companies pay" pitched another new cigarette tax, but left out a few details.

It had plenty of smoke from David Sutton of Altria/Philip Morris, who is suddenly concerned about Medicaid patients in Florida. He offers the same distortions repeated for years by Big Tobacco hired guns from Richmond, Va., and Winston-Salem and Greensboro, N.C. These companies employ thousands of workers in those states and sell 80 percent of cigarettes in America. They sell more than $3.7 billion worth of cigarettes just in Florida annually, but they want to siphon even more cash out of Florida's economy.

This new tax would be paid by only one Florida company, a company that did not participate in the decades-long conspiracy to hide links between smoking cigarettes and lung cancer, the addictive nature of nicotine and other wrongful acts. Big Tobacco signed the 1997 settlement and agreed to pay $1.3 billion for Medicaid and $11.3 billion to duck punitive damages. Why would the biggest companies pay all those billions? Because the settlement included a release "forever" from state lawsuits for past, present and future actions

The new tax provides no such protection for Big Tobacco's competitors. So does this sound like "fairness" - huge, out-of-state companies are protected from lawsuits while the in-state manufacturer providing jobs for Florida's economy is not? Virginia and North Carolina tobacco giants want Gov. Scott and the Legislature to tax their only in-state competition, family-owned Dosal Tobacco Corp. Dosal played no part in the tobacco conspiracy, was dismissed from the 1997 trial, and has no behavior worthy of punitive damages.

As for much-needed revenue to pay for Medicaid, the Legislature just increased the cigarette tax by $10 per carton on all brands, and Congress added $6 to that. So in 2010 all companies paid an additional $16 tax per carton in the worst recession since the Great Depression. That represents a 45 percent increase on Dosal's products and only a 27 percent increase on Big Tobacco brands. Level playing field?

For eight years, a tax on Dosal has been pushed by out-of-state manufacturers. They want our legislators to give them 100 percent of the market. They want Dosal shut down, while 300 Florida jobs move north. But that should be decided in the free marketplace, not the back rooms of the Legislature. This is an unfair new tax aimed at unraveling justice, eliminating competition in Florida and rewarding decades of racketeering and unethical conduct by the giant out-of-state players. Why should all the cigarettes sold in Florida be manufactured by workers at a handful of enormous plants in Richmond, Greensboro and Winston-Salem?

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