Tobacco-tax cut proponents are blowing smoke

The following are excerpts from a letter sent by Frank J. Chaloupka, a professor of economics and public health at the University of Illinois at Chicago, to both Gov. John Lynch and Senate President Peter Bragdon.

Dear Governor Lynch and Senate President Bragdon:

I have been researching the economics of tobacco taxation, tobacco control policies, and other aspects of tobacco and tobacco control for the past 25 years. My research, as well as that of numerous other economists in the U.S. and globally, clearly demonstrates the effectiveness of higher cigarette taxes in reducing smoking and its consequences, while at the same time generating new revenues.
I recently chaired the Working Group that developed the International Agency for Research on Cancer’s Cancer Control Handbook on The Effectiveness of Tax and Price Policies for Tobacco Control. Among other conclusions, our review concluded that there was extensive evidence demonstrating that higher cigarette and other tobacco product taxes and prices:• Increase revenues• Do not increase unemployment• Reduce overall tobacco use• Reduce the prevalence of adult tobacco use• Induce current users to quit• Reduce consumption among those who continue to use• Reduce initiation and uptake of tobacco use among young people• Lead to larger reductions in tobacco use among lower income populations• Improve population healthThe conclusion from the recent study from the New Hampshire Grocers Association that a 10-cent reduction in the state’s cigarette tax will raise revenues by increasing cigarette sales to New Hampshire residents, as well as increasing cigarette and other product sales to residents of neighboring states who will increasingly cross the border to shop in New Hampshire, is completely inconsistent with existing evidence, including that from New Hampshire.Indeed, cigarette taxes are among the most stable and predictable revenue generators for all states. The authors of the study grossly overstate the extent of cross-border shopping for cigarettes and the likelihood that New Hampshire’s neighbors will be reducing their sales tax rates, while incorrectly describing the reliability of cigarette tax revenues and the revenue impact of cigarette tax increases/decreases.Higher cigarette taxes are a “win-win-win” for the state of New Hampshire in that they reduce smoking and the death, disease and economic costs that it causes, generate significant revenues for the state, and are supported by voters more than any other revenue-generating option.In contrast, a reduction in the state’s tax would be a losing proposition for New Hampshire, resulting in increased smoking, particularly among New Hampshire’s kids, increased public and private spending to treat the diseases caused by smoking, and reduced tax revenues.

Best Regards,

Frank J. Chaloupka