From: Americans for Tax Reform
Posted by Miriam Roff
The most vulnerable populations—small businesses and low-income families— are often the most affected by targeted excise tax hikes. Numerous studies suggest that levying higher tobacco taxes on consumers disproportionately harms low-income consumers—many of which expend almost a quarter of their income on cigarettes. Contrary to the claims made by the professor’s report and the American Cancer Society Action Network, these studies also suggest that higher taxes may not deter smoking. That’s because smokers often thwart the blow of this regressive tax increase by smoking fewer cigarettes more intensively, switching to less expensive or discount cigarettes, and by pursuing low or untaxed cigarettes.
As noted in the tobacconomics report, an Oklahoma tax increase would likely incentivize cigarette smuggling and cross-border sales into states like Missouri and Kansas. Yet, the report fails to examine the impact smuggling, as a direct result of the tax hike, has on small businesses in the state. According to the Tax Foundation, when Illinois nearly doubled the cigarette tax rate, cigarette smuggling rate dramatically increased from 1.1 percent to 20.9 percent in the first year. Small businesses like convenience stores in this state lost tens of thousands of dollars as patrons pursued cigarettes in less expensive markets across state lines.