Up within the Smoke: New Jersey Legislators Need to Extinguish Pennsylvania’s Cigar Tax Harm New Jersey

(The Center Square) – A Republican MP wants to wipe out a tax break Pennsylvania has over New Jersey on cigars and says it hurts small businesses in Garden State.

Rep. Brian Bergen, R-Morris, proposed to A4936 that cigar wholesale tax be limited to no more than 50 cents per cigar under the Tobacco and Vapor Product Taxation Act. In 2002 the state lowered the excise tax rate from 48% of the wholesale price to the current rate of 30%.

“New Jersey currently taxes cigars at 30 percent of the wholesale price with no cap. Just across the border, Pennsylvania sells cigars with no tax, ”Bergen said in a press release. “We have fantastic tobacco shops and local cigar bars selling hand-rolled, high-quality products, but they find it difficult to compete with our neighboring state due to cost reasons.”

According to a July 2014 analysis by a Georgia State University faculty member, Garden State would likely not see a loss of revenue if the cap were changed to 50 cents per cigar. Instead, with the change, the state could see an increase in tax revenue of between $ 7.2 million and $ 8.5 million.

“Tax cuts can, but do not have to, lead to sufficient expansion of economic activity to actually increase tax revenues,” according to the analysis.

There are an estimated 200 premium Pennsylvania cigar retailers located along or near the New Jersey state line. According to a press release from Bergen, 10 states have introduced similar tax caps per cigar.

“While we cannot completely eradicate competition, we can encourage local residents to shop at local independent cigar retailers,” said Bergen. “We have to cut taxes if we want cigar smokers to spend more of their money in New Jersey.

“If we cut the cigar tax, we would see sales tax revenues rise because people would buy more in the state,” added Bergen. “Our excessive tax only harms small businesses and our chance to generate additional income.”