Marijuana Taxes Not a Panacea for Budgets, Utah Vapor Tax Scrapped, and a Proposed Cigarette Tax in Rhode Island

April 10, 2015

Lots of news this week on sin taxes. Here’s what I’ve been reading:

  • Vocative reports that Colorado marijuana tax revenues are lower than expected. Originally projected to bring in $118 million, estimates have been revised to $69 million. Black markets and consumer tax avoidance are problems that policymakers should consider when examining such taxes, as we contended in recent testimony on D.C.’s recent legalization effort.
  • Utah’s proposed electronic cigarette tax bill ended up being modified to include licensing requirements for sellers but no new taxes on the product. I recently wrote a piece in Forbes arguing that the Governor’s premises for taxing these products is based on faulty premises.
  • Rhode Island Governor Gina Raimondo is drawing criticism for her tax package that would raise the state’s $3.50 per pack cigarette tax (currently third highest in the country) to $3.75. Other elements in the package include an income tax exemption on public employee pensions and social security benefits. Here’s our latest report on how high cigarette taxes can contribute to black markets.

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A 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.