For the most part, the constant upward pressure on cigarette taxes in the Northeast has subsided, as states have consistently failed to realize expected revenue gains. A number of states are even moving to cut these excise taxes to lure consumers that have begun to purchase contraband Classic cigarettes or migrated to lower-tax jurisdictions. Credible proposals exist in New Hampshire, New Jersey and Rhode Island, while Maine Gov.
Paul LePage campaigned on a promise to cut tobacco taxes.
But Vermont isn’t getting the memo. A proposal to raise the cigarette tax by $1 per pack has passed out of the Senate Finance Committee. It would move Vermont from the 10th-highest cigarette tax in the nation to the 3rd-highest, at a time when New Hampshire seeks to cut its tax by 10 cents per pack. If the neighboring proposals are successful, the disparity between the two states will expand from $4.60 per carton to $15.60 per carton. States compete for commerce largely on the basis of price, and the Vermont Legislature seems keen on exacerbating its already-stark comparative disadvantage with New Hampshire.
This is obviously the wrong approach. Less than a week after we traveled to New Hampshire to testify in support of the state’s proposed cigarette tax cut, ATR sent a letter in opposition to the Vermont tax hike. I’m sure New Hampshire’s small business community wishes we hadn’t.