NH opposes trend, considers cigarette tax cut

Cigarette packs are on display for sale in a shop in New York City.

STEVE CHIOTAKIS: You often hear about cigarette taxes going up as states try to plug budget holes. But today the story is cigarette taxes potentially going down. Lawmakers in New Hampshire are the latest to try and boost revenue by cutting tobacco taxes.

Marketplace's Mitchell Hartman reports.

MITCHELL HARTMAN: The argument goes lower your cigarette tax, and more smokers will come over the border from neighboring states where the tax is higher, to buy their smokes.

The Republican-controlled New Hampshire House yesterday passed a 10 cent tax reduction to $1.68 a pack compared to $2 or more in Maine, Massachusetts and Vermont.

JOHN DUMAS: 40 percent of all of our sales in New Hampshire are sold to out-of-state consumers.

John Dumas heads the state grocers association. He says raising cigarette taxes -- as New Hampshire has done in recent years -- just drives away sales.

DUMAS: It forces those who legally want to smoke to go to either internet sales or the black market or some Indian reservations outside of New Hampshire to buy their product. They're still going to buy it, but it's just human nature that they're going to buy it at the lowest price they can.

Opponents to states lowering their cigarette taxes, though, say it's a net loss for state revenues at a time they can ill afford it, and it might increase smoking, leading to higher health care costs.

I'm Mitchell Hartman for Marketplace.

About the author

Mitchell Hartman is the senior reporter for Marketplace’s Entrepreneurship Desk and also covers employment.
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Oh BTW, the high and rapidly rising gas prices alter the equation. They reduce the savings. Then the savings have to be greater than the value of your time, wear and tear on your car, etc.

BUT, most smokers probably won't work this out, and since NH doesn't have a sales tax, if they do other shopping at the same time, it might still pay off, because Massachusetts just raised its sales tax from 5% to 6.25%.

State borders exist to prevent excessive taxes. If Massachusetts had moderately higher cigarette taxes, Bay Staters would not bother to go that far to save such a small amount of money. With the current Massachusetts tax, consumers have a real incentive.

When I was a smoker, one trip to NH saved me more than $60. I bought 6 cartons at a time.

The problem is not with the idea of cigarette taxes, it's with excess.

New Hampshire, is turning into a dumpy strip mall state. It is the most Republican area in New England, and it shows.

When we lived in MA, we used to refer to NH as the "Alabama of the North." Good to see they are maintaining their reputation of being just plain dumb.

For the record, I haven't taken up alcohol consumption, regardless of price increas/decrease. I do not think consumer cost causes consumers to take up smoking. For what it is worth, I think that the inclination to begin smoking cigarettes has more to do with whether it is common amongst ones peers and/or family members.

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