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NH bucks trend, proposes cutting tobacco tax

March 17, 2011

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CONCORD, N.H.—As some cash-strapped states are looking to hike their tobacco tax, lawmakers in New Hampshire are looking to drop the state's tax rate, saying, "If you smoke 'em, we got 'em."

The House passed a bill Thursday cutting the tobacco tax 10 cents to $1.68 per pack of cigarettes, and Senate Finance Chairman Chuck Morse says he believes the Senate will support the cut.

Supporters hope the cut will attract smokers across the border from nearby Maine, Vermont and Massachusetts, which have higher tax rates.

"I think it's a positive sign for business. I think it will provide revenue in the long run," said Morse, a Republican who lives in Salem, on the border with Massachusetts.

New Hampshire has historically looked to export its tax burden -- and any resulting health costs -- to other states through taxes on products like tobacco and alcohol it sells to its residents.

"That's always been the way we run our tax structure," said Mike Rollo, spokesman for the American Cancer Society in New Hampshire. "We've always tried to tax people from out of state."

Danny McGoldrick of the Campaign for Tobacco-Free Kids said other states aren't cutting their tax rates in these tough fiscal times because they need the money. Raising the tax produces revenue despite resulting in a desired decrease in the number of smokers, he said.

"These smoking declines, of course, save lives and health care dollars, as well," he said.

David Sutton of Altria Group, the parent company for Philip Morris USA, said he knows of a handful of other states considering similar approaches, including New Jersey and Rhode Island.

But McGoldrick said the trend is to raise the tax, not lower it.

New Hampshire has raised its tax repeatedly since Democratic Gov. John Lynch took office in 2006 -- increasing the tax from 52 cents per pack in 2005 to $1.78 currently.

The New Hampshire Grocers Association has consistently criticized the increases as hurting small businesses, particularly along the border. Association President John Dumais said Thursday that cutting the rate a dime will cost the state tobacco tax revenues, but will result in an offsetting increase in state taxes collected from people renting hotel rooms, eating in restaurants, buying alcoholic beverages, buying lottery tickets and buying gasoline. The net result will be no loss of revenue to the state, but an incentive for tourists to come to the state to shop, he said.

"People coming from out of state are going to have an empty gas tank. They're going to be hungry. They're going to be tired," he said. "It's going to help every business."

State Rep. Patrick Abrami, R-Stratham, made that argument successfully during the House debate.

"We have reached the tipping point. We are hurting our merchants. We are losing sales on our borders," he said.

But state Rep. Christine Hamm, a Hopkinton Democrat, called the move "fiscally stupid."

"No state has cut their tobacco tax and seen a revenue increase," she said.

The House voted 236-93 to send the bill on to the Senate anyway.

Lynch spokesman Colin Manning said the governor does not support the tax cut. Manning pointed out New Hampshire's tax rate already is the lowest in the region.

Massachusetts' tobacco tax rate is $2.51; Maine's is $2; Vermont's is $2.24; Connecticut's is $3; and Rhode Island's is $3.46. Unlike the other states, New Hampshire has no sales tax.

Manning said the House is considering making much deeper budget cuts than Lynch proposed "and now with this action today it raises the question of what else they are going to cut."