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TRENTON, N.J. -- Three years after New Jersey raised its cigarette tax to $2.58 per pack, the Garden State is considering another increase to its state excise tax on cigarettes, this time by 12.5 cents, NJBiz.com reported.
The last time the state raised cigarette taxes, it collected less money in cigarette tax revenue than it did the previous year, as smokers began going to border states or turning to Internet retailers for less expensive smokes, according to retailers and business advocates cited by the report.
The new tax would go into effect July 1, and raise the tax to a little more than $2.70 per pack. New Jersey already has the third-highest cigarette tax in the nation. Gov. Jon S. Corzine’s proposed $29.8 billion state budget includes the tax hike, and estimates the increase will raise an additional $24 million.
"This will lose the state more revenue and it will hurt retailers the most," Arthur J. Maurice, first vice president of the New Jersey Business & Industry Association, told the Web site. "History indicates a more probable outcome is revenues will instead fall by at least $10 million."
He noted the state’s 2006 cigarette tax increase was anticipated to raise an additional $30 million, but resulted in a decline of $17 million in 2007, Maurice told the Web site.
"We have reached a tipping point, and now we are driving more people out of state," he said.
Meanwhile, retailers argue they will not only lose cigarette business, but also sales of ancillary items.
"The customer count will go down," Prashant Desai, owner of a Krauszers c-store in Woodbridge and vice president of the Asian-American Retailers Association, told NJBiz.com. He estimated half his cigarette customers also buy other merchandise.
When the state last increased the cigarette tax in July 2006, his customer count went down 15 percent, he added. "They told us, ‘Why should I pay $75 a carton when I can go to Pennsylvania and pick it up for $45?'"
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