New Jersey Cigarette Tax Backlash

New Jersey smokers soon may be faced with higher prices, as the state is proposing yet another tax increase. Analysts predict that raising taxes will aid the state’s growing budget woes. 

 

The Center for Policy Research of New Jersey (CPR) with help from David Bishop, of Balvor LLC, a firm that researches retail industry issues, examined the Corzine Administration’s proposed 12.5-cent per pack tax increase, which is part of the 2010 buget plan.

 

The study found that the tax increase will have a similar negative effect on revenues as the last tax increase, which driove sales down and caused tax revenues to plummet. The Balvor study predicted a $7 million cigarette tax revenue loss, if the tax goes into effect, which is drastically opposite the $26 million increase projected by the Corzine Administration.

 

Bishop’s study also concluded that almost $5 million in general sales tax revenue will be lost, resulting in a grand total in losses of $12 million.

 

The tax hike threatens to severely hurt convenience store sales, which will further diminish general sales tax revenues because when smokers stop shopping at c-stores, the stores lose money on additional purchases that customer would make as well.

 

In a study of 1.2 million recent customer transactions, Balvor found that a typical cigarette purchase was accompanied by $3.06 of other purchases. Balvor concluded that convenience stores would lose $185 million in total sales next year.

 

Both out-of-state retailers, Internet sites selling cigarettes and street gangs that traffic cheap cigarettes have reportedly benefited from the taxes.

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