Tax hike has many Utahns bootlegging cigarettes
Overall budget coming in close to projections though cigarettes, gas tax monies falling short.
Published: June 19, 2012 05:58PM
Updated: September 11, 2012 11:37PM

The way Utahns buy cigarettes and cars is reshaping Utah tax collections.

A recent $1-a-pack tax hike on cigarettes has many Utahns going out of state to buy them, resulting in less revenue than expected, state officials reported Tuesday.

And frugal Utahns are buying more fuel-efficient cars amid high gasoline prices. While that may be saving them money and helping the environment, it brought lower-than-expected gasoline sales and taxes.

Despite those twists, the state’s revenue projections for this fiscal year — which ends next week — have been nearly right on target, the Legislative Fiscal Analyst’s Office told the Executive Appropriations Committee on Tuesday.

That means lawmakers likely will not have much leftover money to spend, nor any big money holes to fill despite forecasts being off in some areas.

“At least $4 million in cigarette tax revenue has shifted to Idaho, Nevada, Wyoming and Colorado” from Utahns trying to escape higher taxes here, said analyst Thomas Young.

In 2010, the Legislature raised cigarette taxes by $1 a pack to $1.70 — which is currently the 16th highest among the states. In comparison, cigarette tax is 57 cents a pack in Idaho; 60 cents in Wyoming; 80 cents in Nevada; and 84 cents in Colorado. Among neighboring states, only Arizona has higher cigarette taxes than Utah, at $2 a pack.

Analysts figure that Idaho collected at least $1.5 million in extra cigarette tax from Utahns this year; Nevada received at least $1.3 million more; Wyoming, at least $700,000 more; and Colorado, at least $600,000 more.

Even while some Utahns travel to other states to purchase tobacco, more Utahns have stopped smoking.

So far, cigarette tax revenues are off about $775,000 from the previous year, according to the Utah Tax Commission.

Meanwhile, the state’s transportation fund is expected to be up to $20 million below the forecast target.

“There’s been an increase in vehicle miles traveled that hasn’t translated into more motor fuel tax revenue,” Young said. That’s because Utahns have been buying cars that are more fuel-efficient, he said.

Young said studies estimate that the average miles per gallon achieved by Utahns’ vehicles improved by 0.6 miles per gallon this year, to achieve an average of 18.6 miles per gallon. He expects that high gasoline prices — which tend to make people buy smaller cars — will improve mileage even more next year.

Utahns traditionally tend to return to buying gas guzzlers when the economy improves, as it is projected to do, Young said.