Crossing Through Connecticut

Tobacco tax increase proposal could lead to cross-border purchasing.

Linda Abu-Shalback Zid, Senior Editor

CROMWELL, Conn.--The grass is definitely greener on the other side for tobacco retailers in Connecticut. While neighboring Rhode Island is actually considering a $1 reduction in cigarette taxes, Connecticut is considering one of the biggest tax packages in the state's history--including taxes on cigarettes, moist smokeless tobacco and other tobacco products (OTP).

If the proposals for both Rhode Island and Connecticut pass, Gene Guilford, president of the Independent Connecticut Petroleum Association is concerned about the sales that will shift to his neighboring state. Rhode Island's [image-nocss] cigarette state excise tax would then be $2.46 and Connecticut's would jump to $3.40. Meanwhile, Connecticut's border to the north, Massachusetts, has a $2.51 cigarette tax.

"Obviously, one of the concerns we would have is the extent to which we have an imbalance with neighboring states.... Connecticut is not an island, and we can't pretend that there isn't going to be an issue of cross-border traffic. It hurts the whole state, but especially hurts the businesses along the border."

The Connecticut proposal is the seventh recent "deficit mitigation" proposal to include cigarettes, according to Guilford. "Every time the budget was not balanced, the government would come forward, and come up with different ways to balance the budget--and increasing cigarette taxes are in all of those over the last couple of years."

The last time the tobacco tax went up, the revenue to the state did increase, but the number of packs sold did decrease slightly, Guilford said.

The total tax package is expected to account for $1.5 billion in new revenue. Tobacco increases reportedly account for $52.6 million of that amount. (An increase in the state sales tax has also been proposed, up from 6 percent to 6.35 percent, expected to raise an additional $152 million a year.):

Cigarette taxes would increase 40 cents to $3.40, raising an estimated $43 million in 2011-2012, and $33 million in 2012-2013.

Snuff tax would increase by 60 cents to $1 per ounce, raising an estimated $2.6 million per year.

Other tobacco products would increase by 30 percent to 50 percent of the wholesale price, raising an estimated $7 million a year.

With additional taxes affecting gasoline, income and even haircuts, "the personal freedom to enjoy smoke or snuff or a cigar gets that much more expensive." Guilford said that a pack of cigarettes will now cost $8.50 and up. "It's getting to be a very expensive thing to do."

He added, "Especially being a considerable part of our business, that would be a big concern to us."

Do you face particular challenges in the area you operate in? Or have you found a unique way to deal with a challenge? Please let us know about it at [email protected].