Cigarette Tax Hikes Gaining Popularity in US

By Matt Pyeatt | July 7, 2008 | 8:20 PM EDT

( - Half of all states are reportedly considering higher tobacco taxes this year, with one of the more prominent examples coming from New Jersey, where Democratic Governor Jim McGreevey proposes a 50 cent per pack increase.

A spokesman for one tobacco manufacturer admits the higher taxes will affect sales and calls the strategy being used by McGreevey and others "fundamentally unfair."

New Jersey currently has the nation's eighth highest excise tax on cigarettes -- New Jersey smokers must pay eighty cents in taxes for every pack of cigarettes, according to the Federation of Tax Administrators.

But if McGreevey's proposal becomes law, the state's tobacco tax would climb to $1.30 per pack, making it the third highest in the country behind Washington and New York. However, 25 states in all are reportedly considering tobacco tax hikes this year

William V. Corr, executive vice president of the Washington-based Campaign for Tobacco-Free Kids, said the move by McGreevey is much needed in order for the state to curb underage smoking and eliminate health problems.

"We applaud New Jersey Governor Jim McGreevey for his leadership in proposing to increase the state's cigarette tax by 50 cents," Corr said in a written statement. "The governor's farsighted plan is a win-win solution for New Jersey that will reduce smoking among kids and adults while raising much-needed revenue."

Corr said increasing the cigarette tax was a powerful way to reduce the number of individuals who smoke cigarettes. "Increasing cigarette taxes is good public health policy, good fiscal policy and good politics," he said. "Numerous studies show that increasing cigarette taxes is one of the most effective ways to reduce smoking among both youth and adults."

McGreevey predicted the tax on cigarettes would generate $200 million in additional revenues. "This is not only sound fiscal policy; it's good public health policy," McGreevey said in his address to the New Jersey Legislature. "Studies have clearly shown that increasing the cost of a pack of cigarettes is literally one of the most successful ways to reduce smoking."

Daniel Clifton, federal affairs manager for Americans for Tax Reform, said McGreevey's first problem is that his $23.6 billion budget for 2003 is too big.

Clifton said McGreevey wants to spend roughly the same amount, $23 billion, as Pennsylvania Republican Governor Mark Schweiker, despite the fact that Pennsylvania has a much larger population than New Jersey. In fact, Pennsylvania has about 12 million residents to New Jersey's eight million, according to the Almanac of American Politics.

"Jim McGreevey sees his political success as having money and being able to grant out money. That is ridiculous that he is increasing a tax [cigarettes] to spend more money and it is not even on non-public health related issues," Clifton said.

If New Jersey implements the higher cigarette tax, residents will simply drive to neighboring states to buy their cigarettes, Clifton said, and some New Jersey businesses that sell tobacco products will eventually be forced to leave the state.

John Singleton, director of public affairs for R.J. Reynolds Tobacco Company, said the tax increase on cigarettes was "bad policy."

"From the standpoint that you are tax-profiling smokers and targeting them, it certainly makes it expeditious politics. In our view, it is fundamentally unfair," Singleton said.

Singleton admitted that the taxes do affect cigarette sales. "It is going to impact volume. We certainly don't deny that as prices continue to go up and taxes go up that it impacts volume," he said.

But Singleton said higher taxes lead smokers to buy cigarettes over the Internet and that other businesses offering smokers buying alternatives are growing in size and popularity. "What happens is that you find smokers are going to look for ways to get around the higher prices," Singleton said.

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