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The cigarette tax debate

May 19, 2011

WOONSOCKET — James DeForest doesn't have to wonder how much cigarette business he's losing to neighboring Massachusetts. His customers tell him right to his face.
“As it stands now customers verbally discuss how much cheaper tobacco is in Massachusetts,” said the manager of JB Liquors on Social Street.
“They will actually make another stop to avoid purchasing cigarettes in our store.”
Five hikes in state taxes on cigarettes since 2001 have taken their toll on JB Liquors and other vendors near the state's borders with Massachusetts and Connecticut. JB Liquors' cigarette sales have dwindled to a fraction of what they once were, as customers make the quick skip over the border to avoid the state's $3.46 a pack tax on cigarettes, the second highest in the nation after New York.
Cigarettes used to bring in customers who spent additional money on beer, wine and other items they might not have thought about buying until they walked in the store. But DeForest says much of that business has vanished, too.
Now a group of state legislators from the Greater Woonsocket area has introduced a bill in the General Assembly to roll back the tobacco tax by a buck a pack to help out vendors like JB Liquors.
That would push state tobacco taxes down to a nickel below those of the Bay State, 54 cents below Connecticut and, hopefully, eliminate the border-hopping habits of consumers searching for discount smokes.
The bill was co-sponsored by freshman Rep. Robert D. Phillips (D-Dist. 51, Woonsocket), Rep. Jon D. Brien (D-Dist. 50, Woonsocket) and Rep. Brian C. Newberry (R-Dist. 48, North Smithfield, Burrillville), the new minority leader.
Phillips says the same cross-border economics applies to other products, so he has also introduced a measure to cut taxes on gasoline by a nickel, to 27 cents a gallon.
“Rhode Island is hemmed in by two states that have lower taxes on cigarettes,” Phillips said. “We need to do something to encourage the individual in Pawtucket who needs gas to buy it in Pawtucket, not over the line in Massachusetts. We need to encourage a person in Westerly running out for a pack of cigarettes to buy them at a convenience store in Westerly, not at one in Connecticut.”
DeForest and many other border-town vendors wholeheartedly support scaling back cigarette taxes, but not everyone is so happy. Health advocates and anti-smoking groups say it is absolutely the right thing to do – if you want to see more children addicted to nicotine.
Among those sounding the alarm are the Woonsocket Prevention Coalition and its partner agency, the Rhode Island Tobacco Control Network. They've launched a petition drive urging the state lawmakers to let the bill die.
“Our position is always trying to make sure we support the health and well-being of kids and we feel one of the best practices is when you raise taxes because use usually goes down,” says the WPC's Executive Director Lisa Carcifero. “Also it decreases access for kids. Adults can make their own decisions, but we don't want kids to even start because we know by smoking cigarettes they can get hooked quickly because of the nicotine. We know the more expensive the product is the less likely children are to get access to it.”
To buttress their cause, health advocates brought in some star power from the national Centers for Disease Control in Atlanta, Ga., to testify against passage of the bill during a legislative hearing this week – Dr. Tim McAfee, director of the CDC's Office on Smoking and Health.
McAfee told The Call that the latest research on the economics of tobacco suggests that cutting the tax $1 a pack means 6,500 “children” who would have never otherwise smoked would take up the habit in Rhode Island. Also, he said, another 2,500 adults who were on track to quit will change their mind and keep smoking.
Moreover, McAfee said, the entire premise upon which the legislative proposal rests is flawed. While champions of the tax cut say it will actually generate more revenue by stimulating tobacco-related commerce, the evidence points unequivocally in the other direction.
“There are myths or misstatements put out by the tobacco industry,” said McAfee. “The most blatant one that's patently untrue is that by lowering the tax you're going to increase state revenue because more people will buy cigarettes. Absolutely not true. It has never happened.”
But Phillips disagrees, saying the state will actually take in more revenue if taxes on tobacco are cut.
“I believe that view is short-sighted,” he said in a statement. “An individual walking into a convenience store to buy a pack of cigarettes is likely to also buy a bottle of water, perhaps a coffee, a lottery ticket, a gallon of milk, a sandwich or a newspaper, and maybe a few other things. So while the state is potentially losing $1 on a pack of cigarettes, it is making up for it by ensuring that people are patronizing Rhode Island merchants.”
Likening the cut to an investment in the economy, Phillips says, sometimes you have to spend money to make money.
“My prediction is that at the very least it will be revenue neutral, but I honestly believe that it will actually improve sales in Rhode Island for gas and cigarettes and that will increase tax revenue.”
The state took in more than $124.8 million in 2009 in gross revenue from cigarette taxes, according to the RITCN. Though state governments are struggling to crawl out of the recession, New Hampshire and New Jersey are also considering proposals to roll back cigarette taxes.

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