Cigarette taxes gain popularity: Mass. joins other states pursuing hikes, but revenue questions rema

(Sun, The (Lowell, MA) (KRT) Via Thomson Dialog NewsEdge) Apr. 13--BOSTON -- The potential windfall from raising the cigarette tax and the relatively low political cost proved too tempting to resist last week for House lawmakers who approved a $1-per-pack hike. State legislatures across the country are turning to cigarette taxes to help balance budgets at a time when money is tight and hiking gas, sales and income taxes is unthinkable. The proven revenue generator and smoking deterrent, however, is questioned by some in the tobacco industry. Thomas Briant, director of the National Association of Tobacco Outlets, points to places like New Jersey as evidence that states might have hit their ceiling when it comes to taxing smoking. According to Philip Morris, only 12 of the 48 states that implemented cigarette-tax hikes from 2003 to 2006 met their revenue projections. "smokers don't necessarily stop smoking, but drive across the border to another state with lower taxes, order Cigarettes over the Internet to escape any state cigarette tax, or buy from black-market dealers," Briant wrote in a recent op-ed about a $1 hike being considered in Florida. "The real losers in this case will be the hard-working Florida retailers, and ironically, the state as well, because potential tax revenue will evaporate." New Jersey lawmakers last year raised the cigarette tax by 17.5 cents per pack to $2.57, now the highest cigarette tax in the country. Gov. Jon Corzine predicted $30 million in new revenue. The state actually pulled in $23 million less in fiscal 2007 than in 2006, according to the Center for Policy Research of New Jersey. Tennessee similarly raised cigarette taxes by 42 cents per pack. The hike has succeeded in raising new revenue, but as of February, income fell $47 million short of budget projections for the year. "(New Jersey) is the one exception," said Eric Lindblom, director of policy research at the Campaign for Tobacco Free Kids. "Every single other one of them have brought in positive revenue. There may be a cap at some point, but we haven't seen it in most states." The Massachusetts House projects that its $2.51-per-pack tax will generate an additional $175 million for next year to go toward health care if it goes into effect on July 1. The bill now heads to the Senate, where it appears to have considerable support. After the first year, when the state will capture extra money on existing inventory, Tobacco Free Mass estimates the state can conservatively count on about $154 million extra annually. Those figures take into account a 18 percent drop in sales due to smokers quitting, shopping online or in another states, or buying Cigarettes illegally. The Massachusetts tax would be the second highest in the country. New York's Legislature has given its initial blessing to a $1.25 increase, bringing that state's tax to $2.75, not counting another $1.50 levied within New York City. In areas like the Merrimack Valley that closely border other states, some lawmakers viewed the tobacco tax with skepticism. Lowell Reps. Kevin Murphy, David Nangle and Thomas Golden all voted to support an amendment offered Thursday by Rep. Colleen Garry, D-Dracut, that would have stripped the cigarette tax from the broader tax package approved in the House that also closed several corporate tax loopholes. Reps. William Greene, D-Billerica, Geoffrey Hall, D-Westford, James Miceli, D-Wilmington, and Robert Hargraves, R-Groton, also supported that amendment, which was defeated, 105-49. Their main argument is that smokers who live close to the border will cross state lines to buy Cigarettes, where they might also spend money on gas, groceries and lottery tickets. That will hurt local businesses. "We're just driving them to New Hampshire," Nangle said. "You know that." The average pack of Cigarettes now costs $4.19 in New Hampshire, $5.41 in Massachusetts. Cigarettes in neighboring Rhode Island cost $6.27 per pack on average. Lindblom said in Massachusetts, the higher tax will bring a large revenue jump to balance the state budget while reducing smoking among youth. The group estimates that 46,100 teenagers will never start smoking, and 26,000 teens and adults will quit. As the bill moves to the Senate, Sen. Steven Panagiotakos finds himself in a tight spot. he said he has heard from many of the same business owners that lobbied the Lowell representatives against the tax. As chairman of the Ways and Means Committee, Panagiotakos also faces the difficult task of balancing the state budget with a Senate president who has expressed her support for the tax. "I don't know yet," he said. "We haven't made those decisions, but everything is certainly on the table."