Cigarette Tax Snuffing Out Convenience Store Profits: Report

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    NEWSLETTERS

    TK
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    JAKARTA, INDONESIA - FEBRUARY 6: An Indonesian man stubs a cigarette on February 6, 2009 in Jakarta, Indonesia. The Ulema Council, the top Islamic body in Indonesia, passed a 'fatwa' or religious edict restricting Muslims from smoking in public places last week. Whilst optional and non-binding, those non-compliant are considered sinful. Indonesia is the fifth largest tobacco market globally, and tobacco taxes make up around 10 per cent of the government's income. (Photo by Dimas Ardian/Getty Images)

    When politicians raise cigarette taxes, they often do so with the claim that higher costs will cause people to smoke less -- and thus legislators tout themselves as heroes and lifesavers.

    Well, they may be right.

    Since New York cigarette taxes spiked in July, sales have dropped like hot ash -- but, that doesn't mean smokers aren't smoking.

    "The first six weeks of meteoric cigarette tax rates in New York showed a plunge in sales at convenience stores statewide, mainly because most smokers are finding ways to dodge the tax altogether," said the New York Association of Convenience Stores in a report out today.

    According to the Association's "field reports," convenience stores have suffered an average drop of 25 percent to 35 percent in cigarette packs during July.

    But, giving credence to the theory that smokers are getting around the New York state's taxes, NYACS reports that stores "in closest proximity to tribal outlets and state borders experienced losses of up to 45 percent."

    On July 1, Governor Paterson and the Legislature increased the cigarette excise tax from $2.75 a pack to $4.35, the highest state tax rate in the country. The total price for packs in the city -- which charges an addition $1.50 tax -- is above $12 in many stores.

    And NYACS President James Calvin noted that when people aren't coming in for cigarettes, they aren't staying for other items like, gum, soda, Twinkies and scratch-off tickets.

    "It's not just the loss of sales revenue from cigarettes themselves," Calvin said. "It's fewer customers coming through the door to buy cigarettes and other merchandise. For example, many stores have seen a corresponding drop in lottery sales."