Smokers in New Jersey will be shelling out more money to buy a pack of cigarettes or a vaping cartridge starting Aug. 1. It’s just one of several new taxes going into effect across the state as part of the latest budget agreement that’s expected to bring in hundreds of millions of dollars in revenue.
So where is the money going and how will it affect you? The following is a Q&A with John Reitmeyer, NJ Spotlight News’ budget and finance writer, about the numbers and the policies behind the new taxes. It has been lightly edited.
Briana Vannozzi, Anchor: John, what is changing for smokers and vapers on Aug. 1? How much more will they be paying?
John Reitmeyer: Depending on which tobacco product you use, the per cost of a pack of cigarettes is going up. It will now be $3 in New Jersey. And [for] vaping devices, depending on which product you’re using, the cost of what’s known as liquid nicotine is also going up by about the same percentage…
That all starts on Aug. 1 and it is part of the agreement at the end of June that lawmakers and the governor reached as they enacted a new state budget.
BV: So how much more revenue is that going to bring in? And what’s the goal here? Is it just getting that revenue? Is there also a little bit of discouraging smoking? A little bit of both?
JR: Probably a little bit of both. The taxes have increased pretty dramatically over, say, the last two decades when it comes to cigarette taxes, specifically, and that’s corresponded with a reduction in smoking in New Jersey. So there’s probably some public health benefits as well as the state needing the money. Some of the other tax hikes that were enacted are coming into effect this month follow a similar path where the state needs more money.
The state spends more than it takes in in annual revenues, even with these tax hikes. But it bridges the gap a little bit closer. But something that’s occurred while Gov. Murphy has been in office is it seems like there’s been this attempt to do targeted tax hikes. Rather than something across the board, say, like increasing the sales tax that everyone pays, you see taxes increased on specific products or going after specific things such as online gambling, online sports betting. That’s a new tax that went into effect.
BV: It’s like you knew what I was going to ask next. What other taxes are we talking about?
JR: So that’s one of them that’s already in effect in New Jersey. There are new rates now, new fees being assessed on high-dollar real estate transactions — it’s really homes or commercial properties, over $2 million in value. We already had a fee for over $1 million in New Jersey. Now they’ve created a new graduated scale for over $2 million that’s generating several hundred million dollars in new revenue, as is the higher tax on online gambling and online sports betting.
The higher tax on cigarette products [brings] a more modest amount of revenue and there’s a new and increased assessment for hospital and ambulatory care admission fees that has also gone into effect and that’s generating millions of dollars.
BV: Yeah, a little harder to wrap your head around that, than say a tax on a pack of cigarettes or a $1 million home which they raised to $2 million because it’s anymore a $1 million home seems to be more commonplace.
JR: In many parts of New Jersey … But where lawmakers landed — and lawmakers have the constitutional authority to set these taxes — they landed on a higher fee at the $2 million and over threshold.
BV: So where is all this money going? What’s it being earmarked for? Do we know?
JR: Most of it goes into the general fund of the state budget, which means it’s pretty much available for any purpose that New Jersey spends state tax resources on. Some of this can be for hospitals, some of this can be for other big state departments like the Department of Health. It really runs the gamut, but it’s the general fund of the budget.
BV: Which is where the waters can get a little murky. I mean, we’ve heard over many years folks who want to see specific appropriations when there are new taxes and not just into the general coffers, because there’s a little bit of a history of money taken, paying Peter to rob Paul.
JR: Absolutely.
BV: Robbing Peter to pay Paul.
JR: We’ve had this in New Jersey absolutely where the only way there’s a political appetite for a new revenue source is if you promise to dedicate those revenues to a specific purpose that most people can get behind. The reason we have an income tax in New Jersey is that money is constitutionally dedicated to going to either public education or property-tax relief.
