Booze and cigarettes helped New Jersey residents cope with pandemic isolation.

New Jersey has always relied on so-called "sin taxes" to balance the state budget. For decades, revenues derived from taxes on cigarettes had been dropping with a reduction in smoking. That trend was reversed as the state entered pandemic lock-down and many were forced into isolation.

Early on, mental health experts warned of an increase in substance abuse as the pandemic restrictions took hold. The feared spike in overdoses did not happen in New Jersey, but state revenue figures show a good number of New Jerseyans self-soothed with legal substances in greater numbers.

In numbers provided by the treasury in New Jersey's Budget in Brief commentary, there is evidence that state residents were drinking and smoking more and those who had given up cigarettes for vaping went back to old habits. In detailing an increase of $42.1 million in expected tobacco tax revenue, treasury officials noted "a shift in consumption patterns away from electronic cigarettes and back to regular cigarettes."

When you add in another $25.9 million in additional alcohol taxes, the state saw a windfall of $68 million in sin tax revenue.

Excerpt from FY2021 New Jersey Budget in Brief:

  • Cigarette Tax. Cigarette sales have more than held up during the pandemic, actually halting a decades-long downward trend, in part due to a shift in consumption patterns away from electronic cigarettes and back to regular cigarettes. Accordingly, the revised FY2021 on-budget forecast of $92.1 million is $42.1 million above the certified level. For FY2022, on-budget collections are expected to return to the historical pattern of decline, yielding an estimated $71.7 million. The bulk of cigarette tax collections are dedicated to certain off-budget accounts.
  • Alcohol Beverage Tax. Alcohol sales were not impacted by the pandemic in the same way as most consumer spending. Sales for home use rose substantially, more than offsetting the loss of sales at restaurants and bars. Indeed, since alcohol taxes are volume taxes, tax receipts were pushed higher by the increase in consumption. Therefore, the revised FY2021 forecast of $146.1 million is $25.9 million above the certified level. For FY2022, collections are expected to moderate back to $130.0 million, closer to pre-pandemic levels.

In a year where the economy was devastated by Gov. Murphy's shutdowns, the boost in revenue is welcome from a fiscal perspective, it is not likely to repeat. Treasury officials noted in their projections for 2022 they anticipate revenue to fall back "closer to pre-pandemic levels."

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