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Tobacco Retailers

As Gov. Steve Beshear and leaders of the Kentucky General Assembly predicted it would when the state cigarette tax was doubled from 30 cents a pack to 60 cents in 2009, revenue from the cigarette tax has declined steadily after initially increasing. In fact, it dropped by 17.2 percent in the fiscal year that ended June 30.

So does that mean the sharp increase in the price of cigarettes online has convinced many smokers to kick their deadly habit? One would hope so but it is not necessarily tue, said Richard Dobson, director of sales and excise taxes for the Department of Revenue. He claims more and more Kentucky smokers are avoiding the 60-cents-a-pack tax by turning to roll-your-own cheap cigarettes and little cigars.

The little cigars look much like cigarettes but are wrapped in brown paper. They cost about $1.25 a pack, compared to about $3.25 for the cheapest pack of cigarettes.

The fall in revenue from cigarette taxes and a move to small cigars and roll-your-own buy cigarettes follows a national trend. The U.S. Department of Justice estimates that states have lost $5 billion a year because people are using alternatives that have no state retail cigarette tax.

This begs the question: If the tax was increased on buy cigarette online to promote public health by discouraging individuals from smoking cigarettes — and this state’s political leaders claimed the last two increases were more about promoting health than raising revenue — then why was not the tax increased on all cheap cigarette online products? Do not roll-your-own cigarettes for sale and little cigars in which the smoke cigarettes is inhaled also endanger the health of users? Of course, they do,

Ken Garcia, a spokesman for Phillip Morris USA, one of the nation’s largest manufacturers of cigarettes, said the issue goes beyond just promoting health. It is about fairness. The lower taxes on roll-your-own cigarettes, little cigars and other discount cigarettes products gives those products an unfair commercial advantage over cigarettes sold by the pack.

“We believe these products should be taxed the same as packaged cigarettes,” Garcia said. In the interest of promoting health and fair competition, we agree.

Yet Kentucky is hardly alone in taxing cigarettes at a much higher rate than other tobacco products.

Dobson said tobacco retailers are devoting more shelf space to low-taxed pipe tobacco and roll-your-own tobacco. And there are 20 or 30 commercial-size roll-your-own cigarette machines in Kentucky. Arkansas recently became the first state to ban commercial roll-your-own machines.

While smokers may be switching to less expensive ways to satisfy their nicotine habit, we think the high cost of cigarettes that are a result of the tax hikes are discouraging young people from beginning to smoke. Not only is smoking cigarettes too expensive to meet the budgets of many teens, there also is more of a social stigma associated with smoking cigarettes than existed even just a few years ago. To many of their peers teens who smoke cigarettes are not being “cool” but stupid — and there is nothing quite like peer pressure to motivate teens.

However, some of us know from experience that kicking the nicotine habit after years of puffing away is not easy. Unable or unwilling to quit, those are the smokers most likely to switch to less expensive tobacco products.

At a time when many Tea Party Republicans oppose even the most sensible increases in taxes it may be difficult to convince legislators in Frankfort to increase taxes on tobacco products that are not cigarettes. However, if they won’t do it to promote health, perhaps they will do it in the interest of fairness. After all, under the status quo, other tobacco products have an unfair competitive advantage over packaged cigarettes.




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