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Tobacco tax's losers

October 23rd, 2006 at 06:35 am


Situated just steps away from the MU campus, the Tiger Sinclair gas station has an advantage when it comes to tobacco sales.

Oftentimes, owner Cindy Mutrux said, students who are about to head out of state will come into the store to stock up on cheap cigarettes.

“I have kids from New York and Chicago that will buy five cartons to last them until they get back here because in their states, cigarettes are so expensive,” Mutrux said.

At 17 cents per pack, Missouri’s tobacco tax is second lowest in the nation. Because of this, cigarettes sold in the state cost much less than they do in other places, where the average tax added on is around $1.

If voters pass an initiative on Nov. 7 to raise the tobacco tax to 97 cents, the cost of a pack of cigarettes in the state will increase by 80 cents. This has tobacco retailers worried the incentive to purchase cigarettes in Missouri may disappear.

“The bottom line is, right now, Missouri has a tax advantage over all eight of our border states,” said Ron Leone, executive director of the Missouri Petroleum and Convenience Store Association. “If Amendment 3 passes, it will level that tax advantage and put us at a tax disadvantage.”

Currently, Leone said, tobacco retailers in Missouri’s border counties get much of their profit from smokers who cross over from states such as Illinois, where the tobacco tax is 98 cents.

If Missouri’s tax rises to almost a dollar, Leone said he worries that sales at convenience stores, gas stations and other tobacco retailers could be pinched.

“When we no longer provide a financial incentive for people to come to Missouri, not only is it going to hurt my members in terms of lost profits, but also lost sales and tax revenues,” he said.

In 2002, Illinois increased the tax on a pack of cigarettes by 40 cents. The state’s Commission on Government Forecasting and Accountability estimates that over the past four years, a small portion of Illinois’ tobacco sales have been lost to border counties in Missouri and Indiana.

Kansas also raised its tobacco tax in 2002, to 79 cents per pack from 24 cents. Ron Spidle, owner of the discount retailer Smokes For Less, said he had to shut down four of his six stores in the state as a result of the increase.

If Missouri raises its tax, Spidle said he worries he may have to close some of his 10 stores in Missouri, including one in Columbia.

Kurt Ribisl, a researcher at the University of North Carolina who specializes in the study of tobacco control policy, said that although an increase in tobacco tax could hurt some retailers, it is not likely to cause the state’s economy as a whole to suffer.

“People say that if you raise the price up, all of a sudden you’ll get less money, but that’s absolutely false,” he said.

Ribisl recently studied the employment levels of tobacco retailers across the nation between 1994 and 2004. What he found, he said, is that although tobacco stores, gas stations and convenience stores did see a decline in sales and consequently, a decrease in employment, supermarkets and other large stores that sell tobacco did not.

“Employment is an indicator of the health of a retail sector, so if sales are really dropping in a store they often have to cut back on the number of people,” Ribisl said. “We saw that although there were some declining sales in tobacco stores and convenience stores, supermarkets and others that sell cigarettes actually showed an increase in employment over this period.”

Nationwide, he said, there are 51,343 supermarkets that sell tobacco, compared with 6,184 smaller tobacco retailers.

“Overall, they cancel each other out so there’s no economic harm,” Ribisl said.

Those in support of the tax increase argue that the true economic burden is the costs of tobacco-related illnesses.

“If we look at what economic impact smoking has had on our state, it’s $4.3 billion, according to the Centers for Disease Control,” said Cindy Erickson, spokeswoman for the Committee for a Healthy Future, the Missouri-based group that proposed the tax increase. “If we were to reduce (smoking) we would be able to spend those revenues elsewhere.”

Tobacco retailers, though, say that any smoking declines will be hard to measure because it’s likely sales will be lost to the Internet.

In 2001, the national research group Forrester Research predicted that by 2005, 14 percent of all tobacco sales would be made over the Internet, resulting in a loss of $1.4 billion in state profits.

“When prices increase significantly there is a small portion of people who will turn to Internet,” Ribisl said. “But generally you’ll see 90 to 95 percent of people will still continue to buy cigarettes at local stores.”

Mutrux said that because her business depends on cigarette sales, she can only hope the proposed tobacco tax increase wouldn’t affect her business. But as a nonsmoker, she said she also wants to see others stop smoking.

“I encourage that,” Mutrux said. “But people are going to smoke regardless.”

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