Tobacco tax increase looms on horizon

by Lesley Politi on April 1, 2009

SAULT STE. MARIE — These are the good old days for those who enjoy tobacco.
Okay, maybe not. Federal and state taxes are already exorbitant, but rest assured ye seekers of the nicotine fix that next month’s increase will make today’s prices seem like a bargain. The April Fool will come in the form of any addict or recreational user who failed to stockpile before prices skyrocket at the end of the month.
The increases: Cigarettes are set to jump 62 cents per pack; individual cigars will go up 40 cents apiece, little cigars will jump 96 cents a pack and pipe tobacco will increase $1.71 per pound.
Those who chew will not be able to side-step the increases either with the federal government tacking on 30.5 cents a pound for chewing tobacco and 91.5 cents per pound for snuff.
The hardest hit, however, are those who have been going to the work and effort of rolling their own cigarettes as the federal government will tack on  $23.53 a pound for this product.
And that’s not all as the increase moves beyond tobacco to hit this customer with increases on cigarette papers and tubes as well.
“It’s a tax on the poor,” said Harold Bailey, owner and operator of Austin’s Oak. “The government can say all they want — they didn’t do it to stop people from smoking, they did it to create a new program.”
Billed as the State Children’s Health Insurance Program (SCHIP), the funds raised from the tobacco increase have been earmarked to pay for a new program providing health insurance for children of poor families.
“If they projected $100 million, it’s going to cost $500 million,” said Bailey. “There’s going to be another tax increase (to pay for SCHIP) — I guarantee it.”
Bailey said tobacco is a tough way to make a living. He estimates that he makes $3 to $4 a bag on his sales while the federal government will be knocking down $25 a bag and the state rakes in a minimum of $14 a bag.
“They’re getting more money than I do,” said Bailey, essentially saying the state and federal government is killing its golden goose by overtaxing the product.
From Bailey’s perspective, the tax hike has provided a short-term boost in sales as people try to buy in bulk ahead of the increase.
“But in April, I won’t do any business,” he predicted. “March will be good, but it won’t take me through the rest of the year.”
Bailey offered up a few more predictions as well. The new tax will likely cause 10 percent, maybe 15 percent, of people to give up tobacco products. He also guessed that business might go up by 10 percent in the roll-your-own category as more people shy away from the name-brand cigarettes carrying a price tag around $63 a carton. Even with the new increases, Bailey calculated, a roll-your-own smoker can get two-and-a-half cartons for around $70.
He also feared the state may decide to tax the federal tax — which will cause the price to increase even more in April.
“I’ve even talked to my distributors and they don’t know how that is going to work,” he admitted.
The alternative, coincidentally, just happened to come rolling off the fax machine on Wednesday afternoon in the form of a press release from the Michigan Department of Community Health. The Michigan Tobacco Quit Line is now offering free nicotine replacement products for people who want to quit smoking or chewing tobacco. To be eligible, interested parties must call 1-800-QUIT-NOW in order to access an eight-week supply of nicotine patches, gum or lozenges.
The press release indicates the Quit Now program is available to all Michigan residents over the age of 18 regardless of insurance or income status.
So, there are three options — You can pay, stockpile or quit.

Source: www.sooeveningnews.com

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