$1 Cigarette Tax Cut for Michigan?

Senate reviewing proposal

LANSING, Mich. -- Michigan could be the next state to rollback its cigarette tax as its economy continues to struggle.

Following in the footsteps of New Hampshire, which recently cut its cigarette tax in a move to increase revenue, politicians in Michigan--the state generally regarded as having the worst economy in the country--are considering Senate Bill 517, which would roll back the $2 per pack cigarette excise tax, among the highest in the nation, and reset it at $1 per pack, according to a report in the Big Government blog.

The rollback would be partnered with [image-nocss] budget cuts, including an option that would tighten up Medicaid restrictions, loosened by the previous Democratic administration.

As with New Hampshire, experts believe the move could enable Michigan to become more competitive vis a vis neighboring states with higher cigarette taxes, encouraging consumers to purchase their cigarettes within the state rather than elsewhere, according to the blog.

In addition, the move could reduce the attractiveness of smuggled cigarettes illegally sold without tax being levied. Studies by the Mackinac Center for Public Policy have estimated that nearly 35% of all cigarettes consumed within the state were purchased outside its borders, in Indiana, Ohio and even Kentucky. The estimated tax-induced smuggling in Michigan, which increased steadily as the taxes on cigarettes also increased, was a hefty 16&, the fifth highest in the nation.

SB 517 is sponsored by Republican state senators Mark Jansen and Jack Brandenburg. It is currently being reviewed by the Senate Committee on Finance.