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Sunday, December 31, 2006

Retailers and smokers get ready: new $1 sales tax to begin

By Pegasus News wire

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The new tax takes effect immediately in 2007. The collected money will be used to fund state schools. Some businesses are expecting to take a hit.

Reports the AP:

(Store owner owner Philip) Rhodes said a representative from R.J. Reynolds Tobacco Co. told him to expect an immediate 20 percent drop in sales at his shop, which has been in Marshall for 11 years. That forecast is based on what happened to owners in other states after similar cigarette tax hikes.

Voters overwhelmingly said they preferred the cigarette tax. Gov. Perry signed legislation this past June to increase the tax, which may or may not lead to more bootlegging.

Posted by Blair

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Mike Orren

Mike Orren Staff

This sales forecast strikes me as a case of lies, damn lies and statistics. That 20% number sounds like leftover propaganda from RJR's fight against the legislation.

First, let's assume we buy the fact that the higher price will depress sales. There are studies from the Tobacco Companies (albeit old, but the dismal science doesn't tend to change that much) that suggest that sales are minimally impacted for committed smokers -- it is only newer, younger (read: underage) smokers who are deterred. That's cool by me.

Chicago's similar tax is only expected to bring sales down 6%.

(And RJR's lame argument about the tax hurting consumers and not manufacturers is laughable: If they feel so bad, they should cut their margins to make up the difference.)

Here's a really good study on this topic, debunking the 20% sales dip, reinforcing that the sales loss comes from teens, and also debunking the idea that we're in for rampant smuggling: http://www.healthpolicyguide.org/doc....

The only problem I have with this tax, as a mostly nonsmoking ("small l") libertarian is that the funds are going to the wrong place. Smokers shouldn't have to carry any more burden for education than nonsmokers, unless there are new studies showing that smoking produces an increase in fertility.

Now, if this money went towards smoking education programs and towards offsetting the costs incurred by state and local government caring for sick smokers without insurance, I'd be all for it.

But let's get our arguments straight.

And, my dear Pegasi: Double extra credit points to whomever follows up with Philip Rhodes in 90 days to confirm the impact, if any, on his sales.

1 year, 9 months ago ( Link to this comment | Suggest removal )

Mike Orren

Mike Orren Staff

Music by Asleep at the Wheel; visual by the industry:

And another favorite...

And finally, a musical shout out to my homeland:

1 year, 9 months ago ( Link to this comment | Suggest removal )

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