Taxes

Where Have New Jersey's Smokers Gone?

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In an Asbury Park Press op-ed piece, Gregg Edwards, president of New Jersey's Center for Policy Research, argues that the state's cigarette tax—at $2.57½ a pack, the highest in the country—has reached a "tipping point" where a higher rate no longer brings in more money. In fact, he notes, the latest increase in the tax was followed by a reduction in revenue, from $787 million in fiscal year 2006 to $764 million in fiscal year 2007. The decrease in cigarette purchases is partly due to smokers who cut back or quit (an avowed goal of higher cigarette taxes), but Edwards notes that many smokers may be getting cigarettes online, in neighboring states with lower tax rates (cigarette sales in Delaware are mysteriously on the rise), or from the black market. The differential between New Jersey's tax and other states' is a smuggler's dream. Imagine what you could make by hauling a truckload of cigarettes from, say, South Carolina, where the tax is 7 cents a pack.