April 11, 2013

Tennessee State House of Representatives
State Capitol Building
600 Charlotte Avenue
Nashville, Tennessee 37243

Dear Representative:

On behalf of the 11,658 members and supporters of the Council for Citizens Against Government Waste (CCAGW) in the state of Tennessee, I urge you to reject the tax increases in HB 644, which would negatively impact consumers by raising the mandated minimum mark-up that retailers are required to incorporate into the price of cigarettes.

HB 644 would nearly double the minimum markup on the cost of cigarettes, raising it from 8 percent to 15 percent.  Despite the fact that this bill would raise taxes on consumers, the accompanying fiscal note to the bill projects that it would decrease state revenue by $244,400 in fiscal year (FY) 2012-13 and by $1,466,600 in FY 2013-14 and subsequent years.

History has shown that raising excises taxes does not produce projected revenue, as such tax increases drive purchases to untaxed or lower-tax venues, like Native American territories and the Internet.  Of the 57 excise tax increases that states implemented between 2003 and 2007, only 16 met or exceeded revenue targets.  Furthermore, the Congressional Budget Office has reported that cigarette excise taxes are the most regressive type of excise tax and disproportionately impact the poor and those living on fixed incomes. 

At a time of economic turmoil, politicians should be pursuing policies that offer taxpayers some relief, rather than imposing new burdens.  CCAGW urges all members of the Tennessee State House of Representatives to oppose HB 644.

Sincerely,

Tom Schatz

President, CCAGW