Friday, September 10, 2010
Cough It Up
September 8, 2010
State governments don't get a lot of fiscal good news these days, so it was surprising this week when the state of Connecticut announced that a recent $1-a-pack tax increase on cigarettes raised $5 million more than the state had projected. As economists would predict, the daunting total of a $3-a-pack tax in Connecticut—the fourth highest burden in the country—did reduce the sale of cigarettes. Some smokers reacted to the tax by quitting, with others finding different ways around the tax.
But the surprising fact is that not that many quit smoking or evaded the tax—not enough, anyway, to cause the state to collect less in cigarette taxes than it would have without the hike. This experience is not unique to Connecticut. Over the last decade or so, several states and jurisdictions have experimented with massive cigarette tax increases, as much as 100 percent or more over the existing rate. California, for example, still has a relatively low state cigarette tax, but in January 1999, it ballooned from 37 cents a pack to 87 cents. In 2002, New York City raised the tax on a pack of cigarettes from 8 cents to $1.50, an astronomical hike of nearly 1,800 percent.
Posted by Yulie Foka at 1:58 AM