Higher Cigarette Tax Generating Less Than Anticipated

The new higher cigarette tax in Alabama is bringing more money to the state, but not as much as anticipated.

The legislature raised the tax a quarter a pack to more than 67-cents a pack. It was a key element to balancing the budget following a second special session last September. Lawmakers said that would raise 70 million- dollars a year, a significant chunk of the 166 million-dollars in new revenue generated for the General Fund.

After the smoke cleared on the first three months of the higher tax, the cigarette tax numbers don’t look too good.

In the first quarter of Fiscal 2016 (October 2015 thru December 2015), 42.5 million-dollars in tobacco taxes were collected according to the Department of Revenue, up 13.5 million-dollars from the same period in Fiscal 2015.

Projected for the full year, that’s a 54 million dollar increase, 16 million-dollars short of projections.

The state did make 4.6 million-dollars in the first quarter of Fiscal 2016, requiring dealers to put new tax stamps on existing stamped cigarette stocks. Even with that infusion, it still looks like the cigarette tax hike won’t bring in what it was supposed to in its first year.

Local legislators who voted against the cigarette tax hike last year say there’s no way they’ll consider raising it higher, or raising any other taxes.

“No, I didn’t vote for it last year and based on the feedback that I’ve gotten from my constituents I’m not going to vote for any more this year,” said Rep. Margie Wilcox, R-Mobile.

“I was not for any of the taxes and I believe that most of my colleagues who voted for the taxes (last year) are not for taxes this year,” added Se. Rusty Glover, R-Semmes.

Governor Robert Bentley had asked that the cigarette tax be raised 82.5 cents a pack, but the Legislature passed only a 25-cent raise.

Alabama’s cigarette tax still ranks 39th in the country. It’s the same as Mississippi, but half of Florida’s cigarette tax rate.

Two neighboring states, however, have lower cigarette taxes, leading to speculation that Alabamians are driving across the border to buy their smokes. Tennessee’s tax is a nickel cheaper, 62-cents a pack. Georgia’s rate is 30-cents a pack less expensive.



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