Cigarettes and Tobacco News

Dec 17, 2006 -- Imagine losing a dollar every day next year and never finding it again. Texas smokers who go through a pack a day will soon know how that feels.

Starting Jan. 1, cigarette smokers are going to have to shell out an extra buck for every pack they buy. The increase - almost 344 percent from the 41-cent state tax — is part of a plan Texas lawmakers approved earlier this year to lower local school property taxes by increasing and expanding some state taxes. Money from the higher cigarette tax, as well as money from an expanded business tax and other changes, will replace money schools will lose under a new limit on the rate they can charge for local school property.

"It's definitely going to hurt business," said Robert Brook, owner of Tobacco Shoppe in Hallsville. "It's going to hurt anyone that sells tobacco."

Brook, a smoker himself, says cigarettes are expensive enough as it is.

"It's a lot of money to charge these people," he said of the increased state tax.

Newports, for example, cost about $4 before tax at a number of convenience stores in Longview. On the other end, a pack of Golden Beach cigarettes from Don's Food Mart costs about $1.50 before tax.

Revenue estimates

The state comptroller's office estimated that the $1 increase will generate an additional $427 million in fiscal year 2007 (September through August). In 2008, it will give the state an extra $683 million; in 2009 it's expected to give the state a $723 million boost. Those estimates are based on a variety of factors, including the likelihood that some people will cut down or stop their smoking while other smokers in border regions will purchase cigarettes in neighboring states.

Of the expected revenue, 95 percent will go toward the state's property tax relief fund; 5 percent will go toward tobacco cessation and prevention programs.

The Centers for Disease Control and Prevention estimate that in 2005, 20 percent of Texans were smokers. That's about 4.5 million people who, if they still smoke, will be feeling the effect of the tax increase.

Local opposition

"The timing was not right to raise the tax on cigarette products," said state Rep. Tommy Merritt, who voted against the bill. "I felt like the cigarette tax would be a hardship on our military retirees who were provided cigarettes free of charge or at low cost, and encouraged and enticed to begin smoking."

State Sen. Kevin Eltife also voted against the bill.

"I don't believe people are going to see the property tax cuts that they've been promised," Eltife said. "So far they have not."

"My preference on the use of tobacco taxes would be that the revenue would go to health care issues," Eltife explained.

"Tobacco taxes are a declining revenue source, and so that's why I was not excited about using tobacco tax as a means of financing a school package," he said. "Less people smoke, which is a good thing, and if less people smoke, there's less revenue."

Texas ranked 40th in cigarette taxes at the beginning of this year, according to the Federation of Tax Administrators, a source of state tax information for state administrators. That means that 39 states had higher rates.

If the other states keep the same tax rates, then on Jan. 1 Texas will have the 11th highest cigarette tax in the country.

After purchasing a few cartons of cigarettes from Tobacco Station USA on Gilmer Road, 30-year smoker Donna McFall said the pending tax increase has her weighing a move she's not considered before now. "It's affecting me to where I'm thinking about quitting," McFall said.

And even though her health would benefit, McFall is not keen on the tax.

"I think it's more political than it is anything," McFall said. "I don't think it's for health concerns. They can get more tax money out of cigarettes and beer. They have control over that."

Financial loss

Two weeks ago, Tameron Sanchez, the manager at Tobacco Station USA, attended a corporate meeting about the tax hike. She was told the price for a carton of cigarettes (10 packs) would increase by $10 to $12.

Sanchez expects the tax to kill business for a few months, but also said that sales are always slow at the beginning of the year because of New Year's resolutions.

After that, just as many people will be buying cigarettes as before, she predicted.

A while back, Sanchez posted signs in the store to give customers a heads up about the tax.

"We're letting them know as they come in because some customers might want to order extra cartons of cigarettes," Sanchez said. "They're very upset. A lot of them are threatening to go to Louisiana to buy cigarettes. But what we're actually seeing is a lot of people switching over to the generic brands from the major brands."

Sanchez said she is against the tax because of the effect it will have on her customers.

"I know they shouldn't be smoking, but for some of them that's about the only enjoyment they get," she said.

She's also weary of a possible increase in crime because of the high prices.

"We were broken into less than a month ago, so I'm kind of thinking that may happen more," Sanchez said.

An increase in theft is hard to predict, said Sgt. Sean Pendleton, public information officer for the Longview Police Department.

"I hate to automatically say we're going to see an increase," he said. "It's hard to say right now. We need to wait until the tax actually goes into effect to see."

Criminal aspect

Don Talley, owner of Don's Food Stores, has been selling cigarettes in his stores for 35 years. Like Sanchez, he thinks the tax increase will drive up crime. He said this is the biggest single price increase in cigarettes he has ever seen.

"Texas is going to lose a lot of cigarette sales because people are going to go to Louisiana, where they could buy them $10-a-carton cheaper," Talley said. "There's going to be a lot of smuggling."

In Louisiana, the cigarette tax is 36 cents a pack. A random sampling of convenience stores there found that packs can cost from less than $1 to more than $4 before tax.

To quit or not to quit

Rachel Sapp and Nicole Hartman, two of Talley's employees and both smokers, had differing views on the Texas cigarette tax.

"I'm not going to smoke anymore," said Sapp, 23, who started smoking three years ago. "I can't afford them."

She's tried quitting before, she said, and thinks that the new tax will possibly be a good thing for her.

"I probably won't die as quick," Sapp said.

Hartman, on the other hand, was skeptical.

"A lot of people will say they'll quit, but they probably won't," said Hartman, 24, who has smoked since she was 14. "The cigarette industry will see just how many people are truly addicted.

"I'm probably not going to quit," she added.

Like Sanchez, Hartman foresees an initial stall in sales because of the tax, but believes business will resume as normal.

Kavonski Chatman would agree.

"If a person smokes, and they really want to smoke, they're going to pay," said Chatman, just seconds after buying a pack of Newports from Hartman.

"They could raise it up to $10 a pack and people would still smoke cigarettes," Chatman said.

He reckons he'll switch to smokeless tobacco, even though that will also rise in price come Jan. 1.

Right now smokeless tobacco is taxed about 35 percent of the manufacturer's list price, but that will change to 40 percent in a few weeks.

Other smokers, including bartender Reagan Lampley, have said they'll try cheaper brands. Lampley has smoked for the past 22 years, and said that she'd have enough money for a new car by now if she'd never started smoking.

"It's hard to not smoke when you work at a bar," she said. "I know that smoking's not good for you, and there are people who don't smoke, and I respect that. But they should respect us, too."