Nation's Largest Taxpayer Group Blasts Gov. Johanns' Plan to Enact Huge Tobacco Tax Increases

2/12/2003

From: Pete Sepp, Al Cors, or Maureen Tell, 703-683-5700 all of the National Taxpayers Union

ALEXANDRIA, VA, Feb. 12 -- As Governor Mike Johanns re-doubled his effort to ram yet another tobacco tax increase through the Legislature, the 335,000-member National Taxpayers Union (NTU) today urged Nebraskans to push back, and ask their State Senators to oppose the bill (LB 420). The group has nearly 3,000 members in Nebraska.

"As a Democrat-turned-Republican, Nebraska Governor Mike Johanns has been known to sometimes change his positions," said Al Cors, NTU's Vice President for Government Affairs. "Unfortunately, he hasn't changed his view that people who use tobacco products should serve as his personal piggy bank for bloated state spending,"

"Raising any tax during an economic downturn is a bad idea that will result in lost jobs," Cors stated. "But this tax grab is truly outrageous. Tobacco tax hikes fall the hardest on citizens with the lowest incomes." He noted that even federal-level studies confirm the tobacco tax's regressivity. According to Congress's Joint Committee on Taxation, more than 2/3 of all federal tobacco taxes come from those earning less than $40,000 per year.

"Despite that common knowledge, LB 420 goes back to slam those citizens once again, after the Legislature enacted higher tobacco taxes just last year," Cors added. "Hit the poorest again and again -- how incredibly unfair is that?"

"The tax that was raised for a 'limited' period last year will be raised and extended to gouge tobacco users harder, and for a much longer period into the future," Cors stated. This year the tobacco products tax increases by 25 percent, and the cigarette tax increases by more than 30 percent, with the revenue targeted to the General Fund.

However, this rate hike may not translate into the revenues that policymakers expect. Studies by the American Legislative Exchange Council and other groups have documented the upswing in smuggling and cross-border sales that often occurs after tobacco taxes are raised. More than a year ago, Maryland's Comptroller warned that tax-induced price differentials in mid-Atlantic states made smuggling a financially lucrative activity, even for U.S.-based terror cells.

"LB 420 taxes those least able to afford it, to fund more big spending," Cors concluded. "That's why every taxpayer should oppose LB 420, and let their Senator know that unfair tax hikes won't be tolerated."

NTU is a non-profit, non-partisan organization that works for lower taxes, less wasteful spending, and accountable government at all levels. The group's research affiliate recently published a study for citizens and policymakers on state deficit problems entitled, Solutions to the States' Budget Ills. This report is available online at http://www.ntu.org.