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Thursday, November 3, 2011

4 months in, cigarette tax cut no help

CONCORD – The state’s first-ever cut in cigarette taxes has failed to boost revenue as Republican legislative leaders had hoped.

Through the first four months of the financial year, the tax brought in $77.5 million, which was $3.5 million or 4.3 percent less than legislative budget writers predicted.

The state took in $84 million during the first four months last year.

Last month alone, the picture was worse, as the tax took in $16.4 million or 14 percent off the monthly pace.

With much fanfare, the New Hampshire Legislature cut the tax 10 cents to $1.58 a pack after the New Hampshire Grocers Association had maintained for years that a tax cut would lead to an increase in tobacco sales.

Economists working for the grocers predicted the tax cut would lead to $13 million more in cigarette tax revenue.

Anti-tobacco groups hired economic experts who argued the cut would cause tobacco taxes to decline $9 million this year.

Administrative Services Commissioner Linda Hodgdon said initially, it was difficult to determine whether tobacco sales were down because so many retailers in this difficult economy were buying bonds for their wholesale cigarettes rather than paying cash.

With four months in the books, it’s now obvious that sales are off, Hodgdon agreed.

“There’s no arguing with the numbers, and they are pretty firm right now,” she said.

Hodgdon declined comment when asked whether the tax cut in any way affected the declining revenue.

Rep. Susan Almy, D-Lebanon, said the tax cut was counterproductive, as the state should be helping people quit smoking and not make cigarettes cheaper to buy.

“Back in June when the state budget passed, Democrats warned cutting the cigarette tax by 10 cents a pack would have a negative effect on state revenue. The reduction was just a political ploy by the Republicans,” Almy said in a statement. “I think if you asked citizens around the state, they would agree that it wasn’t a good idea to make college more expensive and cigarettes cheaper.”

The Lynch administration analyzed the sale of tobacco tax stamps that are affixed to each pack sold in New Hampshire.

The state issued 55.7 million tax stamps for cigarette packs from this past June through October.

Over the same period last year, 57 million tax stamps were bought.

Tobacco sales have been going down steadily in New Hampshire and other states as fewer people smoke.

The state sold 71.5 million tax stamps during the five-month window five years ago.

As for all state taxes and fees, the state brought in $106 million last month. That’s $4.2 million off this month since legislative budget writers assumed $110 million would come in the door over that time.

For the year thus far, the state has taken in $10.9 million over projections.

The $497.9 million that has come in thus far is nearly identical to the $497.4 million the state collected in this same period last year.

“October is not a big month; November isn’t one either, so December is the next one we have an eye on,” Hodgdon added.

The state’s two main taxes on business came $1.6 million, or 6 percent, under forecast last month.

House Speaker William O’Brien, R-Mont Vernon, said the returns affirm the conservative revenue forecast from GOP leaders in putting together the two-year state budget.

“We have seen the danger of using inflated numbers in the past, with prior legislatures having to reopen budgets and using budget gimmicks to balance the books,” O’Brien said.

“This is an honest budget that deals with the realities of national economy that has yet to recover, and doesn’t manufacture a rosy environment to allow for more spending.”

Kevin Landrigan can reached at 321-7040 or Also check out Landrigan (@KLandrigan) on Twitter and don’t forget The Telegraph’s new, interactive live feed at