Increasing cigarette taxes, which is under consideration by the state Legislature this year, unfairly burdens lower-income smokers and their households.
Cigarette taxes are one of the most regressive forms of taxation because they most negatively affect lower-income adult smokers. According to the Centers for Disease Control and Prevention, about 30 percent of adults who earn less than $15,000 are smokers while only 9 percent of adults who earn $50,000 or more are smokers.
Cigarettes are also the top revenue generator for many small businesses, accounting for nearly 32 percent of in-store sales, according to the National Association of Convenience Stores. Raising cigarette taxes, such as the 50-cents-a-pack increase under consideration in Olympia, will hurt legitimate retailers as adult smokers shift purchases to the other sources. Washington’s retailers, the jobs they provide and the communities they serve would clearly be impacted.
Total state tax-paid cigarette sales in Washington have declined an average of 6.2 percent a year for the last ten years. While cigarette smoking has declined, a large part of the loss in cigarette tax revenues can be attributed to smuggling and contraband, shifting sales to neighboring states and Indian reservations where cigarettes are cheaper, and Internet sales aren’t taxed.
If this trend continues, Washington will collect less and less revenue from cigarette taxes, resulting in larger and larger funding gaps in programs for which the expected revenue is earmarked.
With the proposed 50-cent increase, a typical adult smoker in Washington would pay $2,161 a year to the government in federal, state, and local taxes on cigarette purchases, up from the $ 1,960 they currently pay. On median income households, the cigarette tax burden amounts to about 3.5 percent. That jumps to 14.4 percent for low-income households — an unfair, regressive form of taxation by any measure.
The tax would raise the average price of a pack of cigarettes to $9.07. Washington smokers could save $1,430 a year by buying their smokes in Idaho and $1,237 a year by buying them in Oregon.
Taken together, the impact on small businesses and the effect on lower-income households make the proposed cigarette excise tax increase a bad idea that could weaken the fragile economic recovery and put retail jobs and families at risk.
Jan Teague is president and CEO of the Olympia-based Washington Retail Association, which represents more than 2,800 storefronts statewide.