Our report concluded that increases of 15, 25, 50 or 75 cents in Ohio’s cigarette excise tax would result in minimal increases in total state tax revenues, and a higher cigarette tax could possibly reduce state revenues. Additionally, these minimal potential increases in state tax revenues do not even come close to approaching the $230 million the state of Ohio liquidated from the tobacco settlement fund.
In fiscal year 2007, the year a tax rate was increased in New Jersey, the cigarette tax raised $22 million less than the previous year.
Cigarette excise taxes are regressive, meaning they disproportionately impact low-income consumers. So any proposed tax hike will be paid by Ohioans who are least able to pay.
Cigarette excise taxes are an unreliable, declining and unstable funding source. Statewide smoking bans, a national trend to stop smoking, product substitution, higher fuel costs, smuggling and cross-border sales are major factors in making it difficult to accurately project cigarette excise-tax revenues.
Anyone who has been to a gas station across our southern border can attest to the long lines of Ohio smokers who cross the river to buy lower priced cigarettes in Kentucky. An increase in the Ohio cigarette tax will only exacerbate that problem.
Structural budget deficits, such as those facing Ohio, cannot be solved by relying on a declining tax source to fund services whose costs continue to increase. Higher cigarette taxes are not the answer to Ohio’s budget problems.
Trevor Collier
Dayton
Mr. Colllier is an assistant professor of economics at the University of Dayton.