Report: Utah Tobacco Tax Hike Expected to Fall Hardest on Poor

Published December 14, 2009

A bill by anti-smoking politicians in Utah to raise cigarette taxes by 30 cents is projected to raise tens of millions of dollars—primarily from Utah’s poorest residents, according to a new study.

The study released by the Utah Tax Review Commission also shows that if Utah state Senator Allen Christensen’s (R-Morgan) measure to increase the state’s tobacco tax passes, the average pack of cigarettes in Utah would be $2, bringing in an additional $76 million to state coffers.

Nationally, tobacco taxes bring state governments about $15.4 billion a year.

Utah has the lowest number of smokers in America however. Approximately 21 percent of Americans smoke, while only 9 percent of Utah’s residents light up. In addition, on average 34 percent of a state’s poor smoke, while only 13 percent of the state’s rich (those making $90,000 or more per year) do so.

Veto Expected
Utah Taxpayers Association President and State Senator Howard Stephenson (R-Draper) believes the tobacco tax hike would be vetoed by Utah Governor Gray Herbert (R).

“Governor Herbert has stated he will not support any tax increases. He also signed our no new taxes pledge, so he will likely veto this bill if it passes [the legislature],” Stephenson said.

Herbert has stated he will not raise any taxes in Utah unless “civilization would end.” Herbert opposes the proposed tobacco tax hike and wants to look first at cutting spending at state departments by 3-7 percent to balance the state’s budget.

Stephenson notes the tobacco tax hike bill, SB114, has been transferred from the Health and Human Services Committee to the Revenue and Taxation Committee, where it is now in the Interim Committee. It is likely, Stephenson says, to be voted on by the general assembly soon.

If SB114 is stopped, Representative Paul Ray (R-Clearfield) has proposed a similar measure in the State House. Ray’s bill contains provisions that would ensure Utah’s tax rates on cigarettes automatically stay above the national average year after year.

Crime Increase Expected
Dave Davis, vice-president and general counsel of the Utah Food Industry Association, thinks both bills are bad and believes increasing tobacco taxes is likely to drive up crime rates in Utah.

“Hiking tobacco taxes will take us out of line of the tobacco taxes in other, neighboring states. This will likely lead to fugitive cross-border sales, which is dangerous,” Davis said.

Those against hiking tobacco taxes in Utah point to Virginia, New York, New Jersey, and Michigan, where tobacco taxes are relatively high in relation to neighboring states, and where cigarette smuggling operations are thriving.

Recently, police in Fairfax County, Virginia, busted a massive cigarette bootlegging operation that was garnering millions of dollars.

The federal Bureau of Alcohol, Tobacco, Firearms, and Explosives has estimated cigarette smuggling grows with every new tax hike on tobacco. The bureau believes cigarette bootlegging operations constitute a multibillion-dollar business.

Tax Regressivity Slammed
Davis also worries about how the proposed tobacco tax hike in Utah would affect Utah’s poor.

“[The Utah Food Industry Association] is concerned about the regressiveness on the poor of this tax,” he said.

Stephenson does not blame former Governor Jon Huntsman (R) for encouraging State Senator Christensen to propose the tobacco tax bill. Huntsman has since left his position to become the nation’s ambassador to China.

“To [Hunstman’s] credit, he did the cut corporate income tax and individual tax. And he wanted to eliminate the corporate income tax entirely,” he said. “The [tobacco] tax and others are just part of Utah facing serious financial challenges, but there is now a collective mood amongst conservatives here in Utah that we cannot handle any new higher taxes like this right now.”

Thomas Cheplick ([email protected]) writes from Cambridge, Massachusetts.