Legislature Votes to Increase Cigarette Tax if Revenue Goal Not Met

This week the NH Legislature agreed to increase the cigarette tax if the state does not get $50 million from the current rate between July 1 and Oct 1. The new 25-cent increase would shift the previous $1.08 tax up to $1.33 for each pack of cigarettes sold in the state. The tax will remain lower than what is levied on packs in neighboring states as Maine has a per-pack tax of $2.00, Massachusetts has a tax of $1.51 (although that may soon increase by $1), and Vermonters will soon start paying $1.99 starting July 1 of this year.

Why raise the tax? The state’s $225 million revenue deficit in the state’s two-year budget is the reason. In a state where feelings on taxes are extremely sensitive, cigarette taxes are relatively less an issue to the public than others. Lynch expects the tax to bring in approximately $22 million in new state revenue.

A 2003 study by RTI International found that states that increase tobacco tax rates gain revenue as a result of the increase despite consumption declines. The same study showed that an increase in cigarette taxes reduces smoking levels, especially among youth. With neighboring states increasing their cigarette taxes higher, New Hampshire’s comparatively small increase will probably entice more smokers from neighboring states to buy their cigarettes here allowing for even more income than from just state residents.

New Hampshire is willing to see what happens between July and October because it wants to see how much income can be generated from out-of-staters coming to NH to buy their cigarettes at current comparatively lower prices. If the rising costs in other states sends more people to New Hampshire with its current $1.08 tax, the benefits of an increase might be outweighed. Grocers and convenience stores asked for the period to try and market NH’s lower prices to out of state smokers. It will take until this autumn for the debate to be settled.