High Cigarette Taxes Fail to Meet Expected Revenue Targets: Anyone Surprised? It seems that taxing something causes people to avoid the tax? Say it isn’t so!
According to Patrick Gleason, director of state affairs for the conservative Americans for Tax Reform, tobacco has not been the revenue boon states that have increased cigarette taxes had hoped.
“The lack of interest in raising tobacco taxes this year can be attributed to the fact that tobacco taxes have indisputably proven to be a dubious and declining source of revenue,” Gleason told TheDC. “From 2003-2007, 16 of 59 tobacco tax hikes fell short of revenue projections.”
Here in Washington D.C., for example, the city’s 2009 $0.50 tax hike resulted in a severe drop in expected revenue. In 2010, the District of Columbia’s chief financial officer Natwar Gandhi reported to the mayor that the projected government intake was over $15 million below what they had initially estimated.
Gleason pointed out that for revenue, cigarette taxes are proving to be a loser.
“New Jersey raised its cigarette tax by 17.5 cents in 2007, yielding $52 million less than Garden State lawmakers anticipated and $22 million less than was generated prior to that tax hike,” Gleason told TheDC. “Over the past decade it has become clear that tobacco taxes are an unreliable source of revenue and one in which no budget should depend on.”
Ok then, many states failed to make their projections, but some actually made less under the new rates? Who could have seen that coming?
It’s actually sad that this even has to be a story. It should be filed under, “duh!” Anytime you tax an activity, it either decreases, moves somewhere else, or moves underground. Let’s take a look at some other examples…
The source is found here.
Here’s a two-minute drill in soak-the-rich economics:
Maryland couldn’t balance its budget last year, so the state tried to close the shortfall by fleecing the wealthy. Politicians in Annapolis created a millionaire tax bracket, raising the top marginal income-tax rate to 6.25%. And because cities such as Baltimore and Bethesda also impose income taxes, the state-local tax rate can go as high as 9.45%. Governor Martin O’Malley, a dedicated class warrior, declared that these richest 0.3% of filers were “willing and able to pay their fair share.” The Baltimore Sun predicted the rich would “grin and bear it.”
One year later, nobody’s grinning. One-third of the millionaires have disappeared from Maryland tax rolls. In 2008 roughly 3,000 million-dollar income tax returns were filed by the end of April. This year there were 2,000, which the state comptroller’s office concedes is a “substantial decline.” On those missing returns, the government collects 6.25% of nothing. Instead of the state coffers gaining the extra $106 million the politicians predicted, millionaires paid $100 million less in taxes than they did last year — even at higher rates.
So, not only did they not meet their projected
other people’s money “revenue,” they actually lost money on the tax!
And the evidence that we discovered in our new study for the American Legislative Exchange Council, “Rich States, Poor States,” published in March, shows that Americans are more sensitive to high taxes than ever before. The tax differential between low-tax and high-tax states is widening, meaning that a relocation from high-tax California or Ohio, to no-income tax Texas or Tennessee, is all the more financially profitable both in terms of lower tax bills and more job opportunities.
Lower taxes mean MORE JOBS??? What a COMPELTELY NEW AND ORIGINAL idea!
Updating some research from Richard Vedder of Ohio University, we found that from 1998 to 2007, more than 1,100 people every day including Sundays and holidays moved from the nine highest income-tax states such as California, New Jersey, New York and Ohio and relocated mostly to the nine tax-haven states with no income tax, including Florida, Nevada, New Hampshire and Texas. We also found that over these same years the no-income tax states created 89% more jobs and had 32% faster personal income growth than their high-tax counterparts.
You mean free markets and low taxes CREATE MORE JOBS? You mean PEOPLE EARN MORE? Who would have thought of that?
Did the greater prosperity in low-tax states happen by chance? Is it coincidence that the two highest tax-rate states in the nation, California and New York, have the biggest fiscal holes to repair? No. Dozens of academic studies — old and new — have found clear and irrefutable statistical evidence that high state and local taxes repel jobs and businesses.
If a regressive were reading this, they might say it isn’t true, in spite of all the evidence. They’d probably go into some class warfare argument against capitalism, and then propose legislation that would make all states suck equally, so people and jobs wouldn’t leave.
Of course, they could always follow the great statist tradition of building walls to keep people from escaping.
While I don’t support smoking-it’s a dirty habit that I kicked a few years back, taxing it usually causes people to avoid the tax.