Georgia estimates that increases the tobacco tax in Georgia by $1 would decrease smoking by 6% and would generate $440 million in new revenue for the state.
Economist [image-nocss] say that tobacco taxes are a more reliable and predictable than state income and corporate taxes, the report claims. The 44 other states that have increased tobacco tax since 2000 have seen both an increase in revenue and a decrease in cigarette consumption, it contends.
The increase would raise the state's tobacco tax 270%, added a report by Morris News Service. It would be higher than any neighboring state's tax. But Stephens, the chairman of the House Economic Development & Tourism Committee, dismissed concerns that smokers would cross state lines to buy lower-priced cigarettes.
"For those people who are on the border, if those states are raising their excise tax also, that takes away the argument," he said. "They've got a budget problem just like we do."
South Carolina, which has the nation's lowest cigarette tax at 7 cents per pack, is expected to raise its tax this year, said the report. Disagreements over how to spend the revenue defeated the tax hike last year.
Tobacco marketers who oppose Stephens' plan point to Delaware, which has seen its cigarette sales double since New Jersey began a series of tax increases in 1990. They also note that the revenues rarely meet expectations.
A 25-cent boost in Georgia's cigarette tax in 2003 to meet that year's projected budget deficit ultimately fell 35% below expectations, Bill Phelps, spokesperson for New York City-based Altria Group Inc., the parent company of Richmond, Va.-based Philip Morris USA, told the news service. "It was meant to fill a budget hole then and created another to the tune of $63 million," he said.
Georgia's 12,000 convenience stores are likely to enter the fray since Altria estimates more than one-third of their sales are from cigarettes. "You can imagine if a retailer is put at a disadvantage to a competitor just a few miles down the road across the state line," Phelps said. "This could put more pressure on a small business like a convenience store in an already challenging time."
Stephens, who also has a small retail business, said he regularly sees the consequences of smoking in the patients who enter his pharmacy. Their medical expenses essentially create a tax on the 80% of the taxpayers who do not smoke. "It's a kind of a pay-me-now/pay-me-later kind of thing," he said.
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