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President’s Message
By FRED BARNES

CIGARETTE TAX INCREASE WILL BE A MONEY LOSER FOR NEW JERSEY

By July 1, 2009, the Legislature and Governor Corzine must agree on a balanced budget which now totals $28.6 billion. While the budget deficit has grown from a projected $7 billion to $9 billion after the dismal April income tax collections, Governor Corzine insists his plan to increase the cigarette tax 12.5 cents would generate $26 million in Fiscal year 2010.

However, according to The Center for Policy Research of New Jersey the tax hike would do just the opposite. “The proposed cigarette excise tax will hurt, not help the state’s attempts to raise additional revenue and will further penalize small business owners by encouraging adult smokers to seek lower-cost, out-of-state purchasing alternatives,” says Gregg Edwards, CPRNJ President.

In other words, the tax proposal is simply poor fiscal policy.

Experience demonstrates that small businesses across the state consistently lose business when the cigarette tax is raised, while on-line and cross-border sales only increase. Due to already high government costs imposed on cigarette, a household in New Jersey with a pack a day smoker must pay $1,693 per year to the federal and state governments. The smoker in New Jersey is disproportionally singled out to carry the state’s tax burden.

It is ironic that the Governor’s tax increase proposal will actually create a bigger budget deficit if it is passed versus the state simply doing nothing with the tax. After the last tobacco tax increase, the state not only did not meet projected revenues, they actually did worse and a $52.6 million revenue gap was created.

And, what about the fact that New Jersey smokers will be paying the second highest price for cigarettes in the nation, and they can’t even smoke them in our bars and taverns. It doesn’t take a fiscal genius to figure out why New Jersey would lose money with an additional tax increase. Why then can’t Governor Corzine understand that higher taxes will cause a loss of revenue; a loss of jobs; and drive small business further into the ground?

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