NORTH ANDOVER, MA - The 10-cent-per-pack tobacco tax cut touted last year by New Hampshire Republican leaders as a way to stimulate cross-border sales and hence increase state revenues has fallen $11.5 million below projections, the Eagle Tribune reports.
Fiscal year-ending figures from the state€™s Department of Administrative Services show a $20.1 million drop in tobacco tax revenue for the state. The 10-cent cut was enacted July 1, 2011.
The tax reduction was expected to draw more smokers from Massachusetts, where the tax is $2.51 per pack compared to $1.68 in New Hampshire. As a result of the missed revenue goal, state Democrats are blaming Republicans for pushing through a tax at a time when state revenue has been critical.
"I just didn't think it made any sense," said Senator Lou D'Allesandro. "They (Republicans) ought to come up with the $11.5 million it was down."
Democratic Governor John Lynch strongly opposed the move, and his spokesperson repeated his stance when the news was released.
"It's certainly not a surprise," said Colin Manning, the governor€™s spokesperson. "That's just one of the reasons why the governor did not support that budget."
Republicans insist the tax reduction will produce a long-term economic boost.
"If I had to do it over again, I would do the same thing," said Rep. Peter Silva, adding that despite the 8.7% decline in tobacco tax revenue, store owners told him the reduction has led to a boost in their business.
Other Republican leaders said it was too soon to condemn the reduction, which can be repealed next year. Some added that rising gasoline prices over the last year impacted tobacco sales.
"With the high gas prices, consumer spending has been down," said John Dumais, president and CEO of the New Hampshire Grocers Association. He said roughly 60% of all New Hampshire tobacco sales were to out-of-state customers and that a decrease in fuel prices will increase store spending.
"We're encouraged that this summer we can make up a good part of that (revenue decrease) in the next fiscal year," Dumais said.