"We've reached a stage now where half and in some cases more than half the cost of a pack of cigarettes is taxes," -- James Calvin, NYS Assoc. Of Convenience Stores
Federal Tax Complicates Indian Issue in NYS
(WBEN) The hike in a federal tax on cigarettes is likely to drive several smokers in WNY toward tax free options on Indian reservations, complicating an already sticky issue for Gov. Paterson and the legislature.
"They are intertwined. because the higher the excise tax goes, the more our cigarette customers flee our stores.. and seek out untaxed unregulated sources of cigarette taxes such as those on reservations," says James Calvin, Exec. Dir. of the NYS Assoc. of Convenience Stores.
The state budget being voted on in the next few days, does not include a previously announced effort to initiate tax collection on cigarettes sold to non-indians at tax free reservation stores.
"I just could not believe that they finalized a budget with a multi-billion dollar budget deficit, without tapping into the readily available resource they had, from collecting taxes on the indian sale of cigarettes to non indians," Calvin said in an interview Wednesday with John Zach and Susan Rose.
Gov. David Paterson is the third governor in a row to announce the sales tax would be collected, and then change his position to embrace some sort of negotiations with the Senecas and other tribes.
State Supreme Court Justice Rose Sconiers ruled just before Christmas that the taxation plan could not proceed, and Paterson suggested that some other negotiated payment from the Senecas could help the budget.
"Certainly this new tax by the federal government will create a few more customers coming to our stores over a short period of time,' says JC Seneca, owner of Seneca Pride, a Native American retailer that sells tax free cigarettes in Irving.
The federal excise tax applies to Indian and non-indian retailers alike, Seneca says.
"Whether it will sustain it we don't know, but certainly we are anticipating a little boost in our business, " Seneca tells WBEN's John Zach and Susan Rose.
Calvin's trade group has long fought for the NY taxation of cigarette sales on reservation, and in late March released a study that he says points to over $1 billion in recurring revenues that could be generated for NY by taxing the sales.
The Indian Nations, led predominantly by the Seneca Nation of Indians, have fought the taxes, saying it ignores their status as a soverign nation.
Calvin says that in Niagara County as many as 75 percent of smokers buy tax-free from the Tuscaroras, with perhaps 60 percent of smokers in Erie County turning to the Seneca and Tonawanda Indians.
And the increase in federal taxes is likely to increase their business.
Several smokers tell WBEN that as long as reservation sales remain an option for them, the increase in the federal cigarette tax is not enough to drive them to quit.
"I buy them at the reservation.. I'll keep smoking," says one smoker stopped outside her workplace in an Amherst office park.
Adds another: "I buy them at the reservation and I don't buy the name brands so mine are still $10, maybe $12 a carton."
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Tobacco users are facing a big hit as the single largest federal tobacco tax increase ever takes effect Wednesday.
Tobacco companies and public health advocates, longtime foes in the nicotine battles, are trying to turn the situation to their advantage. The major cigarette makers raised prices a couple of weeks ago, partly to offset any drop in profits once the per-pack tax climbs from 39 cents to $1.01.
Medical groups see a tax increase right in the middle of a recession as a great incentive to help persuade smokers to quit. And smokers tell WBEN that this will only make it that much more important for them too seek out tax free cigarettes on nearby Indian reservations. (Read more)
WBEN Online Extra:
Exclusive WBEN Audio
Click Below to Listen
WBEN's Barbara Burns
outlines the tax change
WBEN's Dave Debo
with reservation reliant smokers
On The WBEN Liveline with....
JC Seneca, Native American retailer
Curtis Dubay, The Heritage Foundation
James Calvin, NYS Assoc. Convenience Stores
K. Michael Cummings, Roswell Park Cancer Inst.
Need Help Quitting?
1-866-NY-QUITS (1-866-697-8487)
The New York State Smokers’ Quitline offers:
- FREE Nicotine Patches, Gum or Lozenges for eligible NYS smokers
- Trained Quitline Specialists offering help with quit plans
- Information about local stop smoking programs
- Informational taped messages
Other Resources:
The Gallup Poll:
Cigarette Tax will Affect Low Income Americans Most
The Heritage Foundation
on loss in state revenue with a high federal tax
The NYS Convenience Stores Assoc.
on NYS income from Indian Cigarette Taxes
Related Stories:
Smoking Hotlines Surge with Tax Hike
Senator wants probe of "E-Cigarettes" Alternative to Lighting Up
The Cost of Cigarettes in NYS
Basic Price: $6-$7 a pack
including.......
Federal Excise Tax: now $1.01
State Excise Tax: $2.75
State/Local Sales Tax: approx $0.70
NY City excise tax: $0.30
Total Tax per pack: $4.46- $4.76
Tobacco taxes are soaring to finance a major expansion of health insurance for children. President Barack Obama signed that health initiative soon after taking office.
Other tobacco products, from cigars to pipes and smokeless, will see similarly large tax increases, too. For example, the tax on chewing tobacco will go up from 19.5 cents per pound to 50 cents. The total expected to be raised over the 4 1/2 year-long health insurance expansion is nearly $33 billion.
Smokers are mulling their options.
Standing outside an office building in downtown Washington last week, 29-year-old Sam Sarkhosh puffed on a Marlboro Light. His 8-year-old daughter has been pleading with him to quit, he explained, and he has set a goal to give up smoking by his 30th birthday.
"I'm trying to quit smoking, and it could help," said Sarkhosh, an information systems specialist. "I don't think it will stop me from buying cigarettes every now and then, but definitely not as often." A friend who smokes Camels went out and bought four cartons in advance, he said.
The tax increase is only the first move in a recharged anti-smoking campaign. Congress also is considering legislation to empower the Food and Drug Administration to regulate tobacco. That could lead to reformulated cigarettes. Obama, who has agonized over his own cigarette habit, said he would sign such a bill.
Prospects for reducing the harm from smoking are better than they have been in years, said Dr. Timothy Gardner, president of the American Heart Association. The tax increase "is a terrific public health move by the federal government," he said. "Every time that the tax on tobacco goes up, the use of cigarettes goes down."
About one in five adults in the United States smokes cigarettes. That's a gradually dwindling share, though it isn't shrinking fast enough for public health advocates.
The Centers for Disease Control and Prevention says cigarette smoking results in an estimated 443,000 premature deaths each year, and costs the economy $193 billion in health care expenses and lost time from work. Smoking is a major contributor to heart disease, cancer and lung disease.
Public health officials are urging individual doctors and staff at telephone "quit lines" in every state to make the most of the tax increase by reaching out to smokers. But it's unclear how deeply the tax will cut into tobacco consumption.
Eric Lindblom, research director for the Campaign for Tobacco-Free Kids, says he expects a drop of at least 6 percent to 7 percent among young smokers.
Philip Gorham, who tracks the tobacco business for Morningstar, the investment research firm, said he expects an overall drop of 4 percent to 5 percent this year. What happens after that is less certain, especially as the economy recovers.
"I would expect a road bump this year," said Gorham. "But these companies will still be extremely profitable. I still think they will make their return on capital by wide margins in the long run."
Philip Morris USA, the largest tobacco company and maker of Marlboro, is forecasting a drop, but spokesman Bill Phelps said he cannot predict how big. Philip Morris raised Marlboro prices by 71 cents a pack early this month, and prices on smaller brands by 81 cents a pack. Other major companies followed suit.
The pricing moves raised eyebrows. "That's nothing more than greed," said Kevin Altman, an industry consultant who advises small tobacco companies. "They weren't required to charge that until April 1. They are just putting that into their pockets."
Responded Phelps: "We raised our prices in direct response to the federal excise tax increase, and people who are upset about that should find out how their member of Congress voted, and contact him or her."
Some policy analysts have questioned the wisdom of boosting tobacco taxes to finance health care for children. They argue that the fate of such a broad program should not depend on revenues derived from a minority of the adult population, many of whom have low incomes and are hooked on a habit. The tobacco industry is also warning that the steep increase will lead to tax evasion through old-fashioned smuggling or by Internet purchase from abroad.
But smoking control advocates such as Lindblom say tobacco taxes should be even higher. "There's a lot of room to go after cigars and smokeless," he said. "We are certainly hopeful that health care reform will include some more increases."
Standing outside a Washington department store, attorney Margaret Webster, 42, puffed on a Marlboro Ultra Light and lamented the fact that the government is reaching deeper into her pocketbook.
"I don't think we (smokers) like it," she said. "But I've heard so many people say they were going to quit when the price went up ... and they're still smoking."
Tax Hike Triggers Surge at Smoking Quit Hotlines
(AP) Calling your state stop-smoking hot line for help kicking the habit? Expect a wait: Smokers are flooding the lines in a panic over an increase in the tobacco tax.
Denver-based National Jewish Health received triple the usual number of calls Monday for a March day to quit lines it runs in six states: Colorado, Idaho, Iowa, Montana, New Mexico and Ohio.
The calls — 2,317 on Monday — had steadily increased all month as smokers began dealing with a big price hit in a sour economy. Not only does the per-pack federal tax climb from 39 cents to $1.01 on Wednesday, but the major cigarette makers raised prices several weeks ago in anticipation.
Quit lines around the country are feeling the surge, according to an informal survey by the Campaign for Tobacco-Free Kids that found a missed opportunity as cash-strapped states struggled to meet demand.
Michigan's quit line itself had to quit — working, that is. It ran out of money in mid-March after logging more than 65,000 callers in five days. Besides counseling and tips, Michigan's hot line offered free nicotine patches, gum or lozenges. The giveaway program in 2008 generated only about 20,000 calls in six weeks, the campaign noted.
Arkansas quit general advertising of the quit line to keep up with calls that rose from about 500 a week in January to more than 2,000 a week in mid-March, the campaign said. And Indiana and Oklahoma were receiving record-level weekly calls.
Price surges typically spur would-be quitters to take the plunge. Not all will be successful. The tobacco-free kids group estimates that about 1 million adults will quit as a result of the tax increase
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