Cigarette tax increase could mean the end of Louisiana’s deficit

Mary Graci

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Governor John Bel Edwards proposed a myriad of tax increases that, if implemented, will affect Louisiana consumers across the board, though one such tax targets a specific group of people: smokers.

Among sales, telephone, and personal income taxes, Edwards is looking to raise Louisiana’s tobacco tax for the second time in as many years.

As of the 2015 fiscal year, tax on cigarettes and other tobacco-based products was $0.36 per pack.

At the start of the 2016 fiscal year last July, the tax was increased by over 100 percent, and currently stands at $0.86.

With his new proposal, Edwards plans on charging smokers an extra 22 cents per pack, raising the tax to $1.08.

Robert Smith, an avid smoker himself, said that no matter the price, he believes tobacco-users will continue to buy and smoke as much as they want, despite the tax.

Being a native New Yorker, he said he’s used to the high price of his daily addiction.

Since 2002, 47 states have increased their cigarette tax rates more than 120 times, and though the balance of smokers to non-smokers has shifted, it hasn’t seemed to discourage the habit all together.

“I don’t think it is much of deterrent on smoking. There’s always this trade off with taxes; you can tax something so much that you discourage it, but if you’ve discouraged it, you don’t make revenue off of it,” John Levendis, associate professor of economics at Loyola University, said. “But given that cigarettes are addictive, cigarette-addicts will pay what they need to.”

The current average state tobacco tax across the country is approximately $1.61, leaving Louisiana one of the more inexpensive tobacco retailers in the U.S., even with Edwards’ proposal.

As it stands, the lowest state tax rate comes from Missouri at only $0.17 per pack, while the highest peaks in New York at $4.35.

The proposed increase in Louisiana’s taxes comes in response to the state’s $750 million budget shortfall for the 2016 fiscal year. By the next fiscal year, there will be an estimated $1.9 billion shortfall.

“This is the worst budget situation in our lifetime,” Levendis said.

With Edwards’ inauguration still fresh in the people’s minds, he has admitted to aggressively attacking the deficit issue as one of his first acts as governor.

“This isn’t exactly the press conference I wanted to be hosting,” Edwards said during a press conference in Baton Rouge on Jan. 19. “The days of budget gimmicks to limp along are over. If we do not act responsibly and quickly, the state will face the most severe cuts it’s ever seen.”

His office stated that these tax increases are a necessary alternative to avoid deep cuts to public colleges and health care services.

“We’ve got to balance our budget and pay for other important things. How do you do that? You’ve got to raise taxes somewhere,” Levendis said.

They believe that with the increased tobacco tax alone, the state will make $17.25 million in just three months, and $81 million in a year.

If Edwards gets approval from the Legislature, the increased tobacco tax rates would take effect on April 1, 2016.

The governor is expected to call the Legislature into a Special Session on Feb. 14, a month before their regularly scheduled meeting, to discuss his proposal.

“Among the many proposals is cigarette taxes, and it’s most likely to pass I would say. Now, cigarette smokers would hate that,” Levendis said. “It’s economically necessary and we did it once, so we can do it again.”

With the majority of Louisiana’s lawmakers Republican, several have voiced their doubts about Edwards’ solution to the budget shortfall, calling for various cuts instead.

“I don’t envy any public official who walks into office with a $1.9 billion budget hole to fill, but they had better be careful trying to fill it by burdening our citizens with higher taxes,” state Treasurer John Kennedy said in a news release. “Burdensome taxes will be like throwing gas on an already out-of-control fire.”

In response, Edwards said that he is open to cuts, but believes that the issue is severe enough to require an influx of revenue as well.

With impending tax increases, retailers question whether their sales will suffer or if the additive nature of their product will keep their customers loyal.

Mohammed Alkajfaji, cigarette-retailer at St. Charles Discount, feels that the state should take a step back and first consider how it affects the people when they increase taxes.

“Last time they increased the tax, most people kept complaining about the increase because they were used to paying a certain amount for cigarettes every day. And most people bought them everyday, so it affected their income monthly,” Alkajfaji said. “People are going to keep buying cigarettes, but not as often. Some people are actually trying to quite right now because of the increase in price.”

However, Levendis said that the sellers who should be worried are those on the border of other states with a considerably lower tobacco tax rate.

Mississippi’s tax currently stands at $0.68 per pack, and if Edwards’ increase is approved, Levendis believes that any Louisiana tobacco seller near the Mississippi border may see some serious drop in sales.

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