N.Y. tax hike brings smokers across border

Thursday July 8, 2010

HOOSICK, N.Y. -- New York’s July 1 tax increase on cigarettes added $1.60 to the cost of a pack, bringing the average cost statewide to $8.92 a pack, according to the New York State Division of Budget, in an attempt to raise revenue and decrease the state’s percentage of smokers.

The immediate effect, however, was on the bottom lines of tobacco retailers along both sides of New York’s borders.

The manager of the Stewart’s on Route 22 in North Hoosick, Dawn Brock, has gotten a lot of feedback from smokers.

Sticker shock

The tax hike was heavily publicized and anticipated, but there was still sticker shock in the days following. Brock has been getting two stock responses from many: "Customers say they’ll go over to Bennington, or they’ll quit," she said.

This was the common theme among tobacco retailers along the New York border, from the Cumberland Farms in Hoosick Falls to the Sunoco on U.S. Route 7.

However, talk is cheap when it comes to quitting, and the convenience factor means New York border towns are still selling tobacco. Brock said sales were down in her store markedly the first two days after the tax increase. But Brock said she had one customer in the store on Monday buying two packs, who just a few days earlier stated that she would be heading to Vermont for her smokes from now on.

Crossing the border reveals that some of those customers were telling the truth. Galen Rhode, proprietor of the North Bennington Variety Store, said tobacco sales there had doubled in the days since the New York tax took effect.

This was also the case at the Paulin Inc. Gulf, just down the street in North Bennington, where the stock of tobacco on hand was increased because of a pick-up in business.

Rhode said tobacco sales at his store were still down from their peak, which was before a series of tax increases in Vermont over the past several years, lending credence to the belief by some that higher taxes are discouraging consumption. The Campaign for Tobacco-Free Kids claims that nationwide, cigarette tax increases this year will spur more than 140,000 adults to quit smoking.

But if the intention is to discourage smoking, Rhode said he doesn’t understand the imminent tax increase on loose tobacco. On Aug. 1, New York’s taxes on cigars, chewing tobacco and loose tobacco are set to rise, from 46 percent of the wholesale price to 75 percent, according to a spokesperson from the state’s Division of Budget.

Rhode made the case that people who roll their own cigarettes probably aren’t smoking as much as they would be if they bought pre-packaged cigarettes.

New York’s tax increase on cigarettes is projected to raise an additional $290 million a year, according to the state’s Division of Budget. The two largest U.S. tobacco companies, Altria Group Inc., and Reynolds American Inc., claim those projections will fall short because more smokers are buying over the Internet, on the black market, from neighboring lower-tax states, or from American Indian reservations.

Plans are in the works for New York to close one of those loopholes. The state’s Division of Budget projects $150 million in additional revenue by taxing tobacco sales on American Indian reservations to people who don’t live there, starting Sept. 1.


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