June 8, 2007 Real Tobacco Tax Hike
June 8, 2007 @ 3:45 PM
How much the tax hike on cigarettes?
Is it 42 cents a pack or is it 46 cents?
By now, most smokers are aware the Tennessee House of Representatives passed the Governor’s Cigarette Tax hike of 40 cents with Senator
Most smokers also know they will pay 42 cents more for a pack.
Wrong!
Yes, in fact, a pack of cigarettes will have an additional tax of 42 cents per pack tacked onto the current 20 cents a pack, totaling 62 cents a pack. But what about sales tax? In
Thus, 42 cents per pack, or $4.20 per carton, will also generate 7% sales tax for the state. This amounts to about 3 cents (2.94 cents) a pack and about 29 cents a carton (29.4 cents).
Then there is the local option sales tax which can vary from 1% to a maximum of 2.75% with the statewide average being about 2.4 to 2.5 cents per dollar. That average changes every time a county or municipality votes to increase the local option tax. The net comes to about a penny a pack or a dime a carton for local governments.
Total tax hike on a pack of cigarettes will actually be about 46 cents or $4.60 a carton.
How much the state and local governments will be helped by this remains to be seen. Money normally spent on other sales tax items may just be diverted to pay for one’s cigarette habit. Some may use the tax hike as an excuse to finally quit smoking.
Finance and Administration Commissioner Dave Goetz confirmed Thursday that the sales tax does apply on top of the cigarette tax. Goetz said his current estimate of $240 million in new revenue from the Cigarette Tax hike takes into account the additional sales tax that would be collected.
The Governor signed the bill into law on June 7, 2007, and it takes effect July 1, 2007.
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