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D.C. Cigarette Tax Revenues Continue to Plunge After Rate Hike

1 min readBy: Joseph Bishop-Henchman

Back in March, we noted that the District of Columbia faced lower cigarette taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. revenues than expected after its recent its recent cigarette tax rate increase from $2 per pack to $2.50 per pack. That downward trend has continued:

Cigarette tax collections continue their stunning collapse in FY 2010, down 23.6 percent between October and April compared to the same period a year earlier. The $15.9 million in tobacco tax collections through April are off $4.9 million despite a region highest $2.50 per pack tobacco tax. The tax rate, 50 cents higher than it was in 2009, took effect Oct. 1.[…]

[W]hen the council agreed to hike the cigarette tax last summer, [it projected] a $9.7 million bump in tobacco revenues. [Instead], it created a $15 million-plus hole in the budget.

D.C. Chief Financial Officer Natwar Gandhi admits that smokers probably went elsewhere for cigarette purchases. (Maryland’s tax is $2 per pack; Virginia’s is 30 cents per pack.

More on cigarette taxes here.