NTU warns Nevada lawmakers

Geoffrey Lawrence

This morning, the National Taxpayers’ Union sent a letter to Nevada lawmakers warning of the potential impact of proposed increases in Nevada’s “sin taxes” on tobacco and alcohol. NPRI has also warned lawmakers against these highly regressive tax instruments in the past.

Here is what NTU had to say on the topic:

While proponents contend that these punitive tax hikes are a “win” for Nevada taxpayers, the reality is that these regressive schemes rarely, if ever, produce the promised revenue and are burdensome to small businesses and the poor.

Senate Bill 386, which will be heard in the Senate Revenue Committee tomorrow, would hike cigarette taxes to $2.00 per pack, an increase of 150 percent from the current rate of $0.80 per pack. The Assembly Taxation Committee will also be taking up Assembly Bill 333, which would raise cigarette taxes to $1.70 per pack and other tobacco products taxes from 30 percent to 55 percent of the wholesale price. AB 333 would also hike levies on beer, wine, and liquor. All told, this bill would constitute a tax increase on Nevada’s citizens and businesses of more than $250 million at a time when the state is still struggling to extricate itself from the recent housing and financial crisis.

Despite fanciful claims from their advocates, many tobacco tax hikes elsewhere have failed to yield the desired revenue. New Jersey reported a $52 million shortfall in tobacco tax revenues after it raised its cigarette tax by 17.5 cents. Subsequent to boosting its cigarette tax by 50 cents in 2009, the District of Columbia reported that it collected $15 million less than expected, and $7.6 million less than it collected prior to the tax hike. Other states, including Arkansas, Maryland, Mississippi, and Rhode Island, have also reported gaps in revenue collections following tobacco tax hikes.

While tobacco and alcohol products may seem like politically-convenient targets for tax increases, the reality is that they are a major source of business for convenience stores and other retail outlets. Raising taxes on cigarettes, beer, wine, and liquor would place Nevada businesses at a serious competitive disadvantage to those in neighboring states like Arizona, Utah, and California, which in some cases would levy significantly lower taxes if SB 386 or AB 333 were to pass. Moreover, since moderate income residents are more likely to partake in these products, they will disproportionately feel the impact of an increase in tobacco and alcohol taxes. Raising a tax that threatens to curtail commercial activity (thereby shrinking the revenue base) and heavily burdens the poor makes no economic sense.

Geoffrey Lawrence

Geoffrey Lawrence

Director of Research

Geoffrey Lawrence is director of research at Nevada Policy.

Lawrence has broad experience as a financial executive in the public and private sectors and as a think tank analyst. Lawrence has been Chief Financial Officer of several growth-stage and publicly traded manufacturing companies and managed all financial reporting, internal control, and external compliance efforts with regulatory agencies including the U.S. Securities and Exchange Commission.  Lawrence has also served as the senior appointee to the Nevada State Controller’s Office, where he oversaw the state’s external financial reporting, covering nearly $10 billion in annual transactions. During each year of Lawrence’s tenure, the state received the Certificate of Achievement for Excellence in Financial Reporting Award from the Government Finance Officers’ Association.

From 2008 to 2014, Lawrence was director of research and legislative affairs at Nevada Policy and helped the institute develop its platform of ideas to advance and defend a free society.  Lawrence has also written for the Cato Institute and the Heritage Foundation, with particular expertise in state budgets and labor economics.  He was delighted at the opportunity to return to Nevada Policy in 2022 while concurrently serving as research director at the Reason Foundation.

Lawrence holds an M.A. in international economics from American University in Washington, D.C., an M.S. and a B.S. in accounting from Western Governors University, and a B.A. in international relations from the University of North Carolina at Pembroke.  He lives in Las Vegas with his beautiful wife, Jenna, and their two kids, Carson Hayek and Sage Aynne.