Lynch: Hike cigarette tax hike 25 cents in NH
CONCORD, N.H.—Gov. John Lynch proposed Thursday raising the cigarette tax 25 cents a pack and cutting a discount that retailers get for wine they buy from the state.
Lynch told the House Finance Committee he also supports a 10 percent tax on Texas Hold 'Em poker games, though that was not included in the proposal he presented Thursday.
The measures are part of Lynch's overall plan to deal with a projected $225 million revenue shortfall in the two-year state budget. He would cut spending $125 million, raise revenues $40 million and borrow $80 million to pay the state's share of school construction costs that currently is paid with cash.
"New Hampshire, like states across the nation, is being impacted by the slowdown in the national economy," Lynch said. "We know our families are feeling the impact, and so is state government."
The cigarette tax increase would raise $22 million toward the hole. Lynch said Massachusetts and Maine are considering raising their tax rates, which will make New Hampshire's prices attractive even with a hike in its tax. The current tax is $1.08 per pack.
Lynch sought and got 28-cent cigarette tax increases toward spending in each of the past two budgets.
Lynch also wants to cut in half a 20 percent discount given to outlets that buy wine from the state. The cut would save the state about $10 million.
Liquor Commission Chairman Mark Bodi said small stores originally benefited most from the discount, but now 90 percent of the wine is sold by 21 large retailers.
"We are making significant cuts," said Lynch. "But after a careful review of agency budgets and budget submissions, I have found that we cannot cut much deeper without seriously impacting essential services and direct services to our people."
The spending cuts range from money intended to lower nursing home rates to a freeze on hiring and equipment purchases. Lynch said he is working with agency heads on further cuts.
He said the mix of cuts, revenue measures and borrowing was a balanced way to address the budget hole.
Lynch cautioned against using state savings instead.
"We cannot be tempted to hastily use those funds to address the shortfall," he said.
Weare Republican Neal Kurk questioned the wisdom of borrowing money for school construction rather than paying cash. Kurk noted that the current budget borrows money to pay for highway projects that had been paid with cash.
Lynch defended the practice as common in the private sector. School buildings are capital projects, he said. Lynch also proposed studying whether the state's school construction aid program should be reformed.
Republicans were quick to criticize the revenue raising proposals.
"Rather than looking for reasonable places to reduce the bloated budget passed last year and bring it into line with our rising revenues, the governor and Democratic leaders of both the House and Senate want to raise still more taxes and fees," said Deputy House Republican Leader David Hess.
Republicans said reducing the wine discount would hurt small businesses.
Hess said businesses will have to absorb the higher cost or pass it onto consumers.
"You're going to hit the consumer or the business either way," he said.
