The work to fix Connecticut’s broken budget is now focused on the negotiations between Gov. Dannel P. Malloy and state employee union leaders as they work to reach a deal worth $2 billion in savings to the state. With taxpayers already stretched to the limit, there is little sympathy in the public for either government or its employees.
They don’t engender much sympathy and they don’t have a public relations firm lobbying for their interests, but the payers of Connecticut’s so-called “sin taxes” are footing the bill for the government’s fiscal trainwreck. The recent budget agreement signed by Gov. Malloy hits hard at the state’s cigarette-smoking, beer-swilling sinners.
The tax on cigarettes, already at $3.00 per pack of twenty, will climb to $3.40/pack on July 1, 2011. With many states confronting budget deficits, it remains to be seen where that tax will put CT on the nationwide rankings of cigarette taxes, but there is little doubt that it will be somewhere near the top. According to Tax Foundation data as of January 1, 2011, Connecticut’s tax was tied for 8th highest in the nation. If every other state held their cigarette tax even, Connecticut would jump to third highest behind New York ($4.35/pack) and Rhode Island ($3.46/pack).
In addition to being an unsympathetic group, cigarette smokers have been popular targets because raising their taxes has always been a reliable way of raising money. Since 2001, state revenue from cigarette taxes has risen a whopping 116% (See above graph). By contrast, revenue from the state’s sales and use tax has experienced a net decline of 17.7% during the same period.
Those who enjoy an alcoholic beverage will pay a little more for the privilege, too. The excise tax on a barrel of beer or hard cider will climb to $7.20 from $6, wine drinkers will see a small rise in their costs, and liquor taxes will increase from $4.50 to $5.40 per gallon. As of January 1, 2011, Connecticut’s beer tax ranked 25th in the nation, tax on wine ranked 25th, and 26th for liquor taxes.
Though the new budget agreement will have a minimal impact on it, no confession of sins would be complete without a mention of gambling in the state, in the form of the Mohegan Sun and Foxwoods casinos as well as the lottery. The down economy has hit both revenue streams hard. Casino gaming was worth $388 million in revenue to the state in FY2010, which was up slightly from 2009 but down more than five percent over the past decade. Connecticut lottery revenues to the state are down a net seven percent over the last ten years.
It is easy to feel little sympathy for the state’s smokers, drinkers, and gamblers. The activities are largely discretionary and as a result, paying a little extra to enjoy them is preferable to raising taxes on income, sales, or businesses. However, it is also important acknowledge that raising taxes on unpopular things because they are unpopular is perilous in the long run.
Heath W. Fahle served as executive director of the Connecticut Republican Party from 2007-2009. Contact Heath about this article by visiting www.heathwfahle.com
