Tuesday, July 1, 2008

Massachusetts House Approves Cigarette Tax Hike

The House has just passed a $1 tax hike on cigarettes in what I am calling An Act to Benefit New Hampshire Border Convience Stores. This brings the total cigarette tax to $2.51. Massachusetts will soon have the 3rd highest cigarette tax in the country.

Economists call this a positive cross-price elasticity of demand. It's a fancy way of saying that when the price of cigarettes increases in Massachusetts people will go to New Hampshire, where cigarettes are much cheaper, to buy a carton.

And with gas prices surpassing $4/gallon, you can expect people to do the rest of their shopping in sales tax free New Hampshire while they're up there.

This means less business for Massachusetts convience stores and longer drives for Massachuetts consumers. The only winner here is convience stores and markets near the New Hampshire border.

5 comments:

Anonymous said...

Is it possible to find out from other states when they implemented a cigarette tax increase if the expected revenue was actually realized? Welcome to Taxachusetts...again.

Anonymous said...

Not that I smoke, but can I get a map of all the Indian reservation outposts so I can start a side business?

Josh McCabe said...

Government revenue projections are almost always over-optimistic (How else can they sell it to the electorate?)

A quick check of other states shows projections falling short in Oklahoma, Tennesee, and Wisconsin.

Josh McCabe said...

Sorry, none of the tribes in Massachusetts sell cigarettes.

But you can expect to see a rise in cigarette smuggling and tax evasion.

Big Brother said...

There no doubt will be a "net" savings on the states medical cost when the total amount of young new smokers decrease.

Raise them another buck!!!

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