The Benefits of Lower Tobacco Taxes

Gov. Rendell hailed the budget, as he signed it into law on Tuesday. However, Rendell isn’t all smiles– the Governor lamented the fact that lawmakers failed to increase taxes on tobacco products, calling their actions “unfathomable.” How could anyone possibly not want to increase taxes on tobacco products?

The legislators’ inaction, however, is quite logical. New York, New Jersey, and Maryland all have higher taxes on tobacco than Pennsylvania. In fact, the tax rate in New York City is an obscene $5.85 per pack. In Pennsylvania, retailers can sell a carton of cigarettes for $11 cheaper than retailers in New Jersey and $50 to $60 less than New York. Altogether, the difference in cigarette taxes between New York and Pennsylvania for a pack-a-day smoker amounts to an extra $1000 a year.

Many of our high taxed neighbors are crossing the border into Pennsylvania to buy tobacco products. Consequently, convenience stores are making more money off of their tobacco products. Accordingly, having lower taxes than our neighbors will actually help to increase revenue. It seems like raising taxes on tobacco, rather than our lawmakers’ inaction, is actually the unfathomable choice.

Raising taxes on tobacco products will cost Pennsylvania jobs and revenue. High taxes actually decrease revenue while lower taxes can increase revenue, now where have I heard that before?