EagleTribune.com, North Andover, MA

November 27, 2011

N.H. political parties split over tax cut results

By Doug Ireland
direland@eagletribune.com

Republicans will tell you one thing, Democrats another. But store owners and customers will tell you straight: New Hampshire's recent reduction in the tobacco tax has failed to increase sales.

Republicans said the 10-cent-per-pack tax cut would help stimulate the Granite State's economy and generate millions of dollars for state coffers.

But it hasn't.

State Administrative Services Commissioner Linda Hodgdon said earlier this month the tax cut has been a major disappointment, with revenues $2.6 million below projections for October and $3.3 million behind last year's numbers for the month.

Despite the tax break, state tobacco sales continue to plummet. They have dropped 2.5 percent since July and 8 percent since last year, according to the state Department of Revenue.

The tax cut was passed by the GOP-led Legislature in June. It was, they said, designed to generate more revenue at a time when the state was strapped for cash. Republicans backed the move, but Democrats did not.

The reduction was expected to draw more people from Massachusetts, where the tax is $2.51 per pack compared to $1.68 in New Hampshire. The 10-cent cut is roughly a $1 decrease per carton.

The idea was that Bay State residents would buy other items when they crossed the border to buy tobacco.

In what can only be described as bad timing, manufacturers raised prices 10 cents a pack within 24 hours of the state rolling back the tax.

Store officials had embraced the reduction, hoping it would boost their sales. They were soon disappointed.

Retailers see little difference

"It didn't really make a difference," said Cory Ste. Marie, manager of Stateline Paysaver on South Broadway in Salem.

Sam Batel, manager of M&N Borderline Store in Salem, agreed.

"They cut the 10 cents, then the manufacturer raised the price 10 cents," he said. "It didn't make a difference."

M&N, also on South Broadway, was flooded with customers buying cigarettes and beer Friday.

Many people, especially those from Massachusetts, stopped off during Black Friday shopping.

They were also stopping off at the nearby Discount Stateline Store. All three convenience stores are a short distance from the Massachusetts border.

"Ninety-percent of my customers are from Massachusetts," said Kamal Patel, owner of Discount Stateline.

The tax cut may have attracted some new customers, Patel said, but he's not seeing a large increase in business.

"It's the same," he said.

No customers interviewed Friday were aware of the tax break.

"I didn't even know about it," said Dayanet Marin, 30, of Haverhill.

Marin and her friend, Shannon Cooper, 24, of Lawrence stood outside M&N on Friday afternoon, enjoying a cigarette after a long morning of shopping.

"I didn't even notice it all," Cooper said of the tax cut.

Marin, Cooper and the other shoppers said they prefer to cross the state line to buy their cigarettes because it's still much cheaper than Massachusetts.

GOP counsel patience

Although the state administrative services commissioner said the tax cut hasn't made a difference, state GOP leaders say it's only a matter of time.

House Speaker William O'Brien, R-Mont Vernon, and House Majority Leader D.J. Bettencourt, R-Salem, joined six local lawmakers last week at Klemm's Mobil in Windham.

They were accompanied by John Dumais, president and CEO of the New Hampshire Grocers Association. Their goal is to increase cross-border sales and tourism.

Despite reports that tobacco tax revenues are behind projections, O'Brien and Bettencourt claim the state's economy continues to grow.

This growth has remained steady ever since Republicans took control of the Legislature, O'Brien said.

"The New Hampshire House has — and will continue to make — our New Hampshire stores more competitive," O'Brien said. "We want to attract more cross-border customers to New Hampshire."

He said only time will tell what impact the tax cut has had on tobacco sales. Bettencourt agreed.

"Additionally, while there has been a rush to note that tobacco revenue has lagged behind projections thus far, I remind everyone that is a two-year budget and we are less than five months into it," Bettencourt said.

Dumais said criticism of the tax is unfair, saying it's helped maintain tobacco sales at a time when higher food, energy and transportation cuts are devastating his industry.

He admitted cross-border sales could use a boost, prompting his organization and lawmakers to promote the new Load-Up! campaign to help improve the state's economy.

"Some have suggested (the tax cut) has not helped the state at all, which is not true," Dumais said.

Since June, 2,000 jobs have created in New Hampshire's food industry and new stores have opened, Dumais said.

Democrats: Just what we expected

But state Democrats, including Gov. John Lynch, say the latest revenue figures confirm their suspicions the tax cut wouldn't work.

"It shouldn't come as a surprise to anyone that when you reduce the amount of a tax, you are going to receive less revenue," said Colin Manning, the governor's spokesman. "That is part of the reason why the governor didn't support lowering the tax."

When October revenue numbers were released earlier this month, Rep. Susan Almy, D-Lebanon, House policy leader for the Ways and Means Committee, was also very critical.

"The reduction was just a political ploy by the Republicans," she said in a statement. "Contrary to their claim, the Republican revenue projections are neither reasonable nor responsible.

Democratic Party spokesman Harrell Kirstein said the tax cut has only benefited big business, calling it "foolish and ridiculous."

"The scheme hasn't helped smokers, small-business owners or anyone other than the big tobacco companies getting a multimillion-dollar tax break paid for by the people of New Hampshire," he said.

Meanwhile, Republicans proceeded to slash programs that help New Hampshire residents, Kirstein said.

"To pay for this, they had to make some devastating cuts to health care and education," he said.

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