Cigarette Tax Cut Rate to Lose Millions in Revenue

Near the close of their conference committee deliberations last month, negotiators from the House of Representatives and the Senate added provisions to the fiscal year 2012-2013 budget that, effective July 1, will both drop New Hampshire’s cigarette tax rate from $1.78 per pack to $1.68 per pack. The Department of Revenue Administration estimates if cigarette sales in FY 2012 were consistent with those of FY 2010, this bill would decrease cigarette tax revenue by $12,778,586.

However, it now appears that House and Senate negotiators failed to account for any such revenue loss in completing the conference committee’s version of the FY 12-13 budget, meaning that the budget for the coming biennium will likely end up out of balance. 

Indeed, the Senators and Representatives who added the substance of HB 156 to the FY12-13 budget recognized the likelihood that a tobacco tax rate reduction would lose revenue, as they included provisions that would restore the tax rates on cigarettes and other tobacco products to their current levels should tobacco tax collections for FY12-13 be lower than those for FY10-11.  Still, as written, such a restoration would not occur until August 1, 2013, meaning that it would not happen until after the FY12-13 budget had already suffered the loss of millions of dollars in revenue.

Consequently, to offset any revenue lost to a cigarette tax cut, the House and the Senate may have to add to the hundreds of millions of dollars in spending cuts that they have already imposed, further undermining critical investments in education and public infrastructure and weakening protections for the state’s most vulnerable citizens.