Some of the most substantial deductions in the federal tax code are the itemized deductions for state and local income, sales, and real estate taxes. This map shows the variation, by county, in the amounts of...
- Georgia Cigarette Tax Hike Would Spur Cross-Border, Black...
Georgia Cigarette Tax Hike Would Spur Cross-Border, Black Market Sales
$1 Per-Pack Increase Would Make Georgia's Cigarette Tax Rate Higher Than Neighbors, Harm Low-Income
Washington, DC, March 10, 2010 -- The $1 cigarette tax hike being proposed by some Georgia lawmakers would push cigarette sales out of state or into the black market, according to a new Tax Foundation report.
Raising Georgia's cigarette tax from 37 cents to $1.37 would make Georgia's cigarette tax higher than all of its neighbors. Florida's cigarette tax is $1.34, Tennessee's is 62 cents, North Carolina's is 45 cents, Alabama's is 42.5 cents and South Carolina's is 7 cents.
"A $1 per-pack increase in the state cigarette tax will put Georgia at a comparative disadvantage for cigarette sales," said Tax Foundation State Analyst Justin Higginbottom, who authored Tax Foundation Fiscal Fact, No. 215 "Georgia Should Refrain from Relying on Smokers to Fill Budget Hole." The Fiscal Fact is available online at http://www.taxfoundation.org/legacy/show/25964.
"This might lead to lower than expected tax revenue for the state and provide incentives for criminals to profit -- rather than the state -- off Georgia's high-priced cigarettes," Higginbottom said.
Border shopping has not been uncommon with tobacco products since the flurry of state tobacco tax increases during the recession, the report notes. After D.C. increased its cigarette tax from $2.00 to $2.50 to close a budget hole in FY 2010, it raised lower than expected revenue due likely to Maryland, Virginia, and D.C. smokers shopping outside the District.
While smokers are politically popular targets, cigarette taxes are regressive and disproportionately harm low-income smokers. A separate Tax Foundation report also found that Georgia's tobacco tax benefits high-income counties the most by transferring funds to them in the form of state services from lower-income areas where more people smoke. Residents of the Cobb-Douglas health district, whose incomes are 20 percent higher than elsewhere in the state, received $1.29 in state services for every $1 its residents paid in cigarette taxes, for a total transfer of $4.2 million.
"Advocates of increasing Georgia's cigarette tax so drastically should consider its consequences and basis as sound public policy," Higginbottom said. "A dollar increase in Georgia's cigarette tax would increase the incentive for border shopping and cigarette smuggling as well as benefit higher-income residents at the expense of low-income smokers."
The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.
To schedule an interview, please contact Natasha Altamirano, the Tax Foundation's Manager of Media Relations, at (202) 464-5102 or firstname.lastname@example.org.
Join the Tax Foundation's fight for sound tax policy Go
Tax Policy Blog
The official weblog of the Tax Foundation.
Tax By State
For information on your state, select it from the drop-down menu.
Ask a Tax Expert
Contact information for Tax Foundation policy staff Ask