NTU Urges Legislature to Oppose Hikes in “Sin” Taxes

(NN&V Staff) – The National Taxpayers Union issued an “Open Letter” from Andrew Moylan, Vice President of Government Affairs, to the Nevada Legislature today, urging opposition to “misguided liquor and tobacco tax hikes.” Here is the full text of the letter:

Dear Legislator:

On behalf of more than 3,100 Nevada members of the National Taxpayers Union, I urge you to reject legislative efforts to raise taxes on liquor and tobacco products. While proponents contend that these punitive tax hikes are a “win” for Nevada taxpayers, the reality is that these regressive schemes rarely, if ever, produce the promised revenue and are burdensome to small businesses and the poor.

Senate Bill 386, which will be heard in the Senate Revenue Committee tomorrow, would hike cigarette taxes to $2.00 per pack, an increase of 150 percent from the current rate of $0.80 per pack. The Assembly Taxation Committee will also be taking up Assembly Bill 333, which would raise cigarette taxes to $1.70 per pack and other tobacco products taxes from 30 percent to 55 percent of the wholesale price. AB 333 would also hike levies on beer, wine, and liquor. All told, this bill would constitute a tax increase on Nevada’s citizens and businesses of more than $250 million at a time when the state is still struggling to extricate itself from the recent housing and financial crisis.

Despite fanciful claims from their advocates, many tobacco tax hikes elsewhere have failed to yield the desired revenue. New Jersey reported a $52 million shortfall in tobacco tax revenues after it raised its cigarette tax by 17.5 cents. Subsequent to boosting its cigarette tax by 50 cents in 2009, the District of Columbia reported that it collected $15 million less than expected, and $7.6 million less than it collected prior to the tax hike. Other states, including Arkansas, Maryland, Mississippi, and Rhode Island, have also reported gaps in revenue collections following tobacco tax hikes.

While tobacco and alcohol products may seem like politically-convenient targets for tax increases, the reality is that they are a major source of business for convenience stores and other retail outlets. Raising taxes on cigarettes, beer, wine, and liquor would place Nevada businesses at a serious competitive disadvantage to those in neighboring states like Arizona, Utah, and California, which in some cases would levy significantly lower taxes if SB 386 or AB 333 were to pass. Moreover, since moderate income residents are more likely to partake in these products, they will disproportionately feel the impact of an increase in tobacco and alcohol taxes. Raising a tax that threatens to curtail commercial activity (thereby shrinking the revenue base) and heavily burdens the poor makes no economic sense.

Rather than increasing regressive taxes, we urge the Legislature to continue pursuing ways to trim wasteful spending and protect taxpayers. We look forward to working with you to enact common-sense reforms that do not include damaging tax hikes.