Allow LL to follow up on the new city revenue projections for a second. In his letter to the mayor and D.C. Council, Chief Financial Officer Natwar M. Gandhi informed them that a $0.50 per-pack cigarette tax hike implemented last October has not gone as planned.
Because the increase, to $2.50, catapulted the District's rate over Maryland's $2-per-pack rate, Gandhi explains, many Maryland smokers who'd bought their tobacco in the District switched back to buying in Maryland. Add that to all the D.C. smokers who started buying cheap-as-dirt Virginia smokes, and you get the picture -- instead of $45.4 million in revenue, Gandhi says the District will only bank $30 million.
But the legislative screw-up is more profound than that: The projections are now that this year's estimated cigarette tax revenues will fall below the pre-hike FY2009 levels ($37.6 million)---in other words, the tax hike got the city less revenue, not more.
Of course, council do-gooders will protest that this is really about a key public-health issue and that they're glad that fewer people are buying cancer sticks in D.C.
All true, and certainly admirable. But that wasn't the thinking at the time the tax was raised, LL can tell you that. The decision was made last July in a closed-door Wilson Building conference room (LL and a few other reporters were allowed inside). The cig-tax hike was on a menu of revenue-raising possibilities presented by Gandhi's office -- and taxing smokers was a no-brainer for a legislative body looking to close a $660 million shortfall. LL recalls very little debate about the decision, and little mention of public health.
The good news: Maryland's currently considering another cig-tax hike, to $3.