Vermont Set to Hike Cigarette Tax as New Hampshire CUTS It

This Friday, Vermont’s cigarette tax goes up by 38 cents to $2.62 a pack, a move that backers hope will bring in an additional $4 million a year in revenue.

But there might be some bad news in store for residents of the Green Mountain State hoping the hike would help boost state coffers. Just as Vermont’s tax is set to go up, its neighbor, Live-Free-Or-Die New Hampshire is cutting its cigarette tax by 10 cents a pack.

The dual moves could prove a boon for New Hampshire businesses, which already do a steady trade in selling goods taxed heavily by other states to residents of neighboring states who drive across the border to stock up. Now, Vermonters may have an added reason to do so, and New Hampshire grocery and convenience stores hope to clean up.

Via NH Journal:

The head of the New England Convenience Store Association said cigarette sales for the state’s 828 outlets make up 40 percent to 50 percent of all receipts.

But cigarette sales volume has dropped steadily as the Legislature and Gov. John Lynch have approved raising the tax four times in the past six years, said Donna O’Donoghue, executive director of the New England Convenience Store Association.

“Even a small reduction in the tax will help the state’s convenience stores increase sales and will benefit the state in this challenging economic time,” O’Donoghue said.

Supporters insist the tax cut will increase cigarette sales enough to generate even more revenue for the state.

[…]

Critics of the tax cut cite concerns that it will decrease state revenue and force the legislature to make cuts in other areas to compensate, while business groups counter that increased sales will actually create more revenue. Either way, the built into the tax cut is a provision to roll back the provision if revenues decrease over the next two years.

So, to recap, the people most familiar with the business of selling cigarettes think they’ll sell more, thus raising revenue, by virtue of this cut. Vermont is increasing its tax, increasing the prospect of increased New Hampshire sales to Vermonters anyway. And if the New Hampshire cigarette tax cut results in a loss of revenue, it gets repealed anyway.

Granite Staters look like they may have gotten this just right.