Posted on 03/10/2003 2:44:34 AM PST by kattracks
CNSNews.com) - As cash-strapped states seek revenue by any means, many have turned to tobacco products to bridge budget deficits. Last year, 21 states increased their tax on tobacco. In Wyoming, the tax on cigarettes increased 400 percent, while in New York City, the tax on cigarettes soared from eight cents a pack to $1.50, an increase of over 1,700 percent, and that's on top of the New York state tax increase on tobacco.
However, according to a new study conducted by the Small Business Survival Committee (SBSC), the expected tobacco tax windfall may be much less than states anticipate since many smokers are turning to the Internet, Indian reservations, even overseas for relief from the high taxes.
Small businesses that sell cigarettes are bearing the burden in lost sales and revenue, according to the study.
"One of my regulars stopped buying cigarettes from me. He used to buy five or six packs a week. He lost his job after 9/11, and the new one doesn't pay as much. He buys his smokes on the Internet. Can't blame him - saves money that way," said Vibhuti, a person who answered the phone at a grocery store in Manhattan.
In the SBSC survey conducted in New York City, 72 percent of smokers living in the city said they were more likely in recent months than in the past to look for stores that sell cigarettes more cheaply, with half saying they made purchases outside of the city since the cigarette tax was increased. Eighty-four percent of commuters said they were less likely to buy cigarettes in the city due to the tax increase.
Nearly nine out of every 10 (88 percent) storeowners polled said the cigarette tax increase had hurt their sales. Fifty-six percent of such businesses noted lost profits of more than $200 per month.
"All of this lost economic activity ensures that both the city and the state will not get anywhere near the amount of revenue they had expected from this tax increase," according to Raymond J. Keating, chief economist for the SBSC.
Among the beneficiaries of cigarette tax increases are companies that sell tobacco products over the Internet or by phone and do not have to charge the taxes.
"We do have a majority of orders going to places where the tax is higher," according to Jeff Walsh, a manager with Smokes-spirits.com, a Kentucky-based wholesale tobacco and alcohol retailer that sells products online.
"Most of our hits come from the East Coast, specifically the New York and New Jersey area," Walsh said.
Smokes-spirits.com has been in operation for three years and has seen steady increases each month in orders, he added.
A survey of online sites based in the U.S., England and Switzerland shows, on average, that the price for a carton of cigarettes is at least 20 percent less than store-bought cartons.
Small businesses that sell Marlboro cigarettes in New York City and New Jersey sell cartons for between $44 and $56. Each location surveyed acknowledged seeing a drop in sales since tax increases were enacted. The current cost for a carton of Marlboro cigarettes sold by Walsh online is $29.49.
"(New York City Mayor Michael) Bloomberg and (New York Governor George) Pataki may have passed laws making my smokes cost more, but they never passed a law saying where I can buy them," said Robert Olson of Brooklyn, who now orders cigarettes online. "If I want to smoke, it's my business. If I don't want to pay this ridiculous tax, that's the state's problem."
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The Canadian government is right now in the process of raising tobacco taxes to even greater heights than in the early 90s.
And like governments everywhere they have a long memory as they've indicted a slew of retired tobacco executives for smuggling back then: Top Tobacco Executives Charged With Sending Cigarettes To Smugglers
Which is the obect of nearly all extra-constitutional actions of the government, state or federal.
That's possible ... but I distinctly remember the bru-ha the first time around and the subsequent repeal of the tobacco tax, back to its' original level, by the Canadian gov't.
Some but not all.
I'm already in the process of looking for ways to grow my own tobacco.
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