Smoke 'Em If You've Got 'Em

After vowing to hold the line on taxes for months, Governor Jodi Rell’s released her latest budget proposal this afternoon which includes $391 million in tax increases. 

Rell described her proposal this way:

“I am showing the leadership we need to get us to the finish line,” Governor Rell said. “In that vein, I have invited the legislative leaders to join me in compromise – and to join me in negotiations starting Tuesday. I hope we will be able to reach an agreement soon and bring a budget to a vote.” (Gov. Rell Press Release)

In what was a big sigh of relief to Rell supporters, her budget features no new income tax hikes.

Her budget package includes a $1/pack hike on cigarettes, which would make Connecticut’s cigarette tax an even $3/pack.  Last year’s $0.62 increase was just implemented in April 2009, and the new proposal would make Connecticut’s cigarette tax the highest in the nation, surpassing New Jersey’s per pack tax of $2.67.  With the new tax rate, more than 50% of a pack’s price will be taxes. 

The new proposal also raises the Alcoholic Beverages Tax by 10%. 

It’s clear that Grandma Governor is no fun.

While there is no doubt this pitch is far more palatable than income tax hikes, it is true that the Governor has simply opted for a different set of winners and losers.  Balancing the budget on cigarettes and booze avoids the harder budget questions, like pension reform or state employee benefits. 

Until the State addresses those questions, we will never get the type of reform that is necessary in state government.

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16 responses to “Smoke 'Em If You've Got 'Em

  1. Connecticut is, roughly speaking, 110 miles wide and about 70 miles tall. So just about everyone in the state is within a 45 minute drive to another state (and New Haven area folks are about the furthest from any state line).

    By making taxes on cigarettes and alcohol so expensive, won’t that simply push people over the border? Furthermore, with no Sunday alcohol sales, that will further incentivize people to drive over the border on Sunday to get alcohol in other states.

    Yeah, the borders are those of Mass, NY and RI. So not exactly low tax places. But still, anyone traveling is going to load up on cigarettes.

    I live in Ridgefield, and am 2 miles from the NY state border. We often get alcohol in NY state, particularly on Sunday. If there’s a big price difference, we’ll definitely cross the state line more frequently to get alcohol. We don’t smoke so don’t buy cigarettes.

  2. AndersonScooper

    “I am showing the leadership we need…”

    What, by having lied to us for the past six months?

    The coming tax increases were coming all along, and the only people surprised are those who believed Jodi and swallowed her Grand Lie.

  3. and the new proposal would make Connecticut’s cigarette tax the highest in the nation,

    Nope – RI is now at 34.60 per-carton state excise tax alone; plus sale tax; federal tax of 10 bucks and am MSA (tobacco settelment) payment that’s currently around $4.50

    It will NOT reduce consumption by any real amount however, but it will kill retailers.

    Regardless of any state generated propaganda, the current level of contraband cigarettes in CT is aprox. 30%
    That’s nothing compared to New York State where it’s an amazing 70%. (Clearly they’ve gone waaaay beyond the tipping point.)

    One is hard pressed to find a pack of cigarettes in any pocket or purse in RI with a RI tax stamp on it. Further, retailers there now stock two kinds, legal and not as they have no choice aside from closing.

    Considering that 76% of all C-store purchases include tobacco products; once the smokers are forced to seek relief (and they will find it) they no longer stop in at all, thus impacting lottery, soft drink, coffee and newspaper sales as well.

    Stores will close.

    Kills Small Business
    Over 85% of all tobacco products are sold by retailers employing less than 12 people.

    CT retailers on the NY line have enjoyed a $7.50 price advantage that has benefited not only them at a typical markup of only 8%; but other Connecticut taxpayers as well as we currently collect a total of around 28.00 (excise tax, MSA, sales tax) per-carton.

    Non-smokers should love that!

    The eastern section of the state with a 14.60 advantage over RI has suddenly exploded.
    Several retailers have had to hire help; some have purchased second cash registers and re-set their entire stores to accommodate the new found business.

    Like New Hampshire we now have people driving into CT, paying our taxes for us and leaving. (60% of the cigarettes consumed in the greater Boston metro market area carry a NH tax stamp)

    The perfect tourists!

    Clearly the road to enjoying higher tobacco tax revenues for CT, now surrounded by higher tax states is less is more.

  4. She is also proposing to raise business taxes 10%.

  5. The coming tax increases were coming all along, and the only people surprised are those who believed Jodi and swallowed her Grand Lie.

    Ed, as always, you’re full of s__t. At least she didn’t propose raising the income tax. We’ve lost enough jobs since we did that, don’t you think?

  6. She is also proposing to raise business taxes 10%.

    I presume this is the corporate income tax? If so, I would imagine that profits are down a lot more than 10% so this probably isn’t going to close the gap much…

  7. So for comparison, here is what nearby states charge in taxes on cigarettes, versus the $3 proposal in CT:

    Mass: $2.51
    NH: $1.78
    NJ: $2.70
    NY: $2.75
    RI: $3.46
    VT: $2.24

    Source: http://www.taxfoundation.org/publications/show/245.html

    (Virginia charges $0.30 for comparison, SC charges $0.07). So a 20 pack carton of smokes in NH would be $24.40 less than it would be in CT under the new proposal. From Hartford, its about 90 minutes drive to southwestern NH, so maybe worth a trip once a year I guess depending on how much you smoke.

    From Stamford to Matamoras, PA is about 97 minutes, if you’re in Brideport it’s about 2 hours. Taxes on smokes in PA are $1.35 so each carton nets $33 in savings.

    Few people are probably going to drive this far just to get cigarettes. However, they may be more willing to go there for other purposes (visit a cranky relative or something). And any smoker going on a longer trip to somewhere in the south would almost certainly stock up a few cartons of cigarettes.

    Tax on beer in CT is currently $0.20 per gallon. There are about 10 bottles in a gallon, so a 10% increase isn’t going to really be noticed. Wine is $0.60 per gallon, so 10% isn’t going to be noticed really. Hard liquor is $4.50 per gallon now. So a couple bucks for a bottle of absolut or stoli. So I don’t see many people going to nh for this. But if they’re going for cigarettes, maybe they’d pick up some alcohol.

  8. One of the more interesting and convincing arguments I’ve heard against increasing the cigarette tax is that it gives the state a disincentive to discourage smoking. Ideally, our state government would work towards cutting the number of smokers in the interest of protecting public health. Not only is this a regressive tax, but our state will rely on tobacco taxes for revenue and therefore benefit from increased tobacco use. To me, this is extremely irresponsible, not “showing leadership.”

  9. At this rate, your cigarettes will cost as much as my cigar….lol

  10. ACR,

    I’m curious where your contraband statistics come from? The two websites you linked are obviously predicated on the cause. I’m not suggesting they’re wrong, just curious if all of your stats come from those two spots?

  11. I’m curious where your contraband statistics come from? The two websites you linked are obviously predicated on the cause. I’m not suggesting they’re wrong, just curious if all of your stats come from those two spots?

    Some are from various news reports.

    However I’m not authorized to speak on behalf of another where I have access to internal data.

    Let me simply point out that tobacco products sell (or more to the point, are consumed) to/by specific demographic groups in more predictable numbers than one might imagine.

    Thus the industry can spot anomalies via tracked sales numbers very quickly.

  12. Waitaminute…she’s also raising the tax on booze?

    Oh boy, talk about hitting a guy right where it hurts!

  13. “I am showing the leadership we need to get us to the finish line,” Governor Rell said. “In that vein, I have invited the legislative leaders to join me in compromise – and to join me in negotiations starting Tuesday. I hope we will be able to reach an agreement soon and bring a budget to a vote.” (Gov. Rell Press Release)

    Let’s be honest here, when you’re in the minority, “compromise” means “caving”. If it’s a “compromise”, what is the legislator giving up,really?

    Real leadership would be to start cutting the bloated bureaucracy in Hartford. How about dissolving all civil service unions as unconstitutional? I bet that would close the gap real quick. No ridiculous state pensions. No automatic raises. Market-related salaries. Merit/performance-based advancement. Market-related health insurance costs.

    Between the resultant cost cuts, and the rats abandoning ship due to the loss of all their sweetheart bennies’, the lefties would lose all their leverage, and our government might become “affordable” again. Crazy, I know.

  14. Waitaminute…she’s also raising the tax on booze?

    Oh boy, talk about hitting a guy right where it hurts!

    Here ya go Bob might want to leave early as there’s going to be more traffic than ever!

  15. Wilbur Cross

    Connecticut is losing young people at an alarming rate. Far from taxing alcohol, we should be subsidizing beer purchases to attract young people. Or maybe just upscale liquor if we’re looking to attract young professionals. Call it crazy, but we need to think outside the box. Anyway, I think a liquor tax is way worse than a progressive income tax.

  16. Here ya go Bob might want to leave early as there’s going to be more traffic than ever!

    I’ve stopped there once in a while, but only while driving through. I won’t make a special trip.

    Wait, I think I still have a $5 winning ticket that I need to cash in before autumn; THAT would certainly justify the gas and tolls!

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