Smoke ’em if you got ’em! Unless, you’re in the Magnolia state, that is. A new Mississippi cigarette tax may be on the way with an aim at helping to repair infrastructure. But either way, don’t hold your breath.
Excise taxes on tobacco are nothing new. All states have levied some form of tax on cigarettes and tobacco products, though it varies from state to state.
Mississippi currently ranks #38 in the nation (#50 Missouri being the lowest tax rate) in terms of cigarette taxes. Mississippi has not raised taxes on cigarettes in several years, despite several failed attempts.
Now, Mississippi House Speaker Philip Gunn (R) recently proposed a “tax swap” plan to direct revenue toward the state’s infrastructure needs. Under the proposal, Mississippi would begin phasing out an individual income tax bracket while instituting an increase to the state’s tax on gasoline.
In seems there are more drivers than smokers in Mississippi! In response, some stakeholders have posed an alternative funding mechanism: increasing the excise tax on cigarettes from $0.68 to $1.50 per pack
Do Healthy People Make Healthy Roads?
Health advocates cheer the proposal. Mississippi has not raised taxes on cigarettes since 2010. However, some analysts are cautioning against putting too many eggs in the Mississippi cigarette tax basket.
For one thing, smoking rates are on the decline. As cigarettes have become more taboo and less inviting, rates across the nation are dropping. That’s great news for citizens, but not great news when it comes to a healthy revenue stream.
The graph below from The Tax Foundation illustrates this cause and effect.
The blue line represents revenue from the Mississippi cigarette tax increases of the past. The yellow lines on the graph represent when a cigarette tax increase occurred. Predictably, revenue went up when new taxes were imposed. However, those increases were short-lived.
Notice the steady decline from 1970 until 1990 when a new tax hike occurred. Revenue increased again in 1990 but declined again until the next one. This roller coaster of revenue indicated that while a Mississippi cigarette tax increase may help in the short-term, it is not a reliable long-term source of tax revenue.
Furthermore, studies have shown that taxes on items directly related to transportation (such as gas) prove far more reliable in terms of consistent, steady tax revenue. For states looking to increase revenue for infrastructure, a gasoline tax may be a better method.
It should also be noted that nearby states such as Tennessee and Alabama have cigarette tax rates that are currently comparable to Mississippi. Should the state increase their cigarette tax, residents could easily travel out of state to purchase their smokes. This has occurred with other “sin taxes” such as Seattle and Philadelphia’s taxes on sugary beverages.
Cost of Living Impact
Smokers won’t welcome the news of a new tax hike on cigarettes in Mississippi, though it probably isn’t enough to cause people to flee in droves. However, any additional expense contributes to overall cost of living.
City vs City doesn’t examine cigarette taxes specifically, however our cost of living calculator considers most state and local taxes in addition to housing, transportation, and other expenses.
City vs City’s powerful technology allows the user to compare living costs at the zip code level. A valuable tool for anyone looking to improve their cost of living situation without compromising on quality.