Businesses Fear Tobacco Tax Job-Loss

Apr 12, 2010, 11:34 ET from Washington Neighborhood Stores

OLYMPIA, Wash., April 12 /PRNewswire/ -- Retired program manager of the tobacco tax enforcement program for the Washington Liquor Control Board, Carter Mitchell, announced today his opposition to the proposed $1.00 per pack increase in the state's excise tax on cigarettes.  

"This tax is a job-killer," said Mitchell, now a consultant with Washington Neighborhood Stores (WNS).  "From 1997-2006, my officers and I witnessed the effect that high cigarette taxes have on consumer buying habits," said Mitchell.  "We are surrounded by lower-tax states.  People will gladly flee the state's high taxes by going to Oregon or Idaho and that hurts businesses right here in the state."

If the legislature approves the $1.00 per pack increase, Washington cigarette tax rates would be $18.45 per carton higher than in Oregon and $24.55 per carton higher than in Idaho.  "In today's economy, those are big differences and people are willing to travel across state lines in order to save that kind of money," said Mitchell.  

In fact, several economists estimate that legal, taxed cigarette sales will drop in excess of 20 percent.  Such a large drop in sales will have a significant impact on small businesses across the state.  Estimates are that retailers and wholesalers will lose more than $150 million as well as hundreds of jobs.

Both Democrat and Republican members of the Washington House of Representatives recently expressed their concern about the impact of the proposed cigarette tax increase.

Rep. Steve Kirby (District 29) recognizes that the cigarette tax increase is a "money loser for the state of Washington."  Rep. Kirby acknowledges that the vast majority of people who do not quit smoking, will look for "non-taxed alternatives whether they be legal or non-legal."   Mitchell noted that shifting to these types of sources for tobacco products hurts legitimate businesses all across the state.

"In fact, research shows that as much as 85 percent of individuals respond to high taxes in this way," adds Mitchell.  "This could include casual trips to Oregon or Idaho to buy tobacco, as well as organized cigarette smuggling that crime syndicates have increasingly embraced over the last several years.  It's become a real problem."

Rep. Doug Erikson (District 42) - representing a Northwest Washington district - joined the bi-partisan chorus of legislators opposed to the tax.   Providing a dose of reality for tax-supporters, Rep. Erikson flatly stated that people will go to Oregon or Idaho to buy their tobacco products.  He went on to remind legislators that is exactly what happened when Washington raised the tax on other tobacco products a few years ago.  Eventually state legislators lowered the tax and sales returned.

"My experiences in statewide tax enforcement reinforce all that I have heard from distinguished state legislators of both parties, as well as respected economists across the country, " said Mitchell.  "People will go to great lengths to get their tobacco products as cheaply as possible and Washington businesses and employees will suffer as a result."

SOURCE Washington Neighborhood Stores