Smokers fuming as state considers adding to tax hike

Local security guard Michael Wagner knows all about the $6.10-per-carton jump in cigarette taxes he'll pay on Wednesday when the federal levy on smokes rises to $10 a carton.

What Wagner didn't know was that Nevada legislators could tack on another $10 per carton before the state lawmaking session ends in June.

"Ten bucks a carton? Oh, Jesus," Wagner said, eyes wide. "I might have to quit if they do that."

Thus emerged a glimpse of the Catch-22 that could come with boosting sin taxes: The state wants more money for its budget; but if legislators try to extract too much financing from discretionary habits, they could tax revenue right out of Nevada's coffers.

Local people interviewed this week inside smoke shops said they'll quit, smoke less or buy cheaper cigarettes.

Plus, said smoke shop owners, smaller tobacco stores could go out of business as smokers abandon their habits and inventory costs rise.

Moe Herrawi, general manager of Discount Cigarettes on West Craig Road, estimated the Las Vegas Valley houses as many as 600 smoke shops and said half of them could close. And Stuart Cowan, general manager of Las Vegas Paiute Tribal SmokeShop on Main Street, guessed that 20 percent to 25 percent of smaller smoke stores could go under if the state gooses cigarette taxes to $10 per carton.

State legislators who support a higher cigarette tax respond that an extra $10 a carton, $1 a pack, could contribute more than $200 million to narrowing the gap between revenue collections and the proposed state budget. They also say they hope a bigger tax pinch could induce smokers to quit, which would in turn help reduce health costs.

And though the Legislature is unlikely to approve earmarking the excise tax for specific programs, lawmakers have linked the suggested revenue increase to potential funding for health programs targeting pregnant women, children and prevention efforts, services Nevada has "never been able to adequately fund," said Assemblywoman Sheila Leslie, D-Reno.

"Given our budget crisis, I believe we need to review all potential revenue sources and determine if existing resources can be adjusted to assist the state in meeting its obligation to provide essential services," said Leslie, who introduced Assembly Bill 255, which would push up the cigarette tax.

"I also believe there is a substantial nexus between use of tobacco products and the high cost of health care, a cost shared by individuals and the state through its Medicaid program."

Leslie said that Wednesday's federal increase could render the state's $1-a-pack proposal too steep.

Nevada's current cigarette tax of 80 cents per pack, $8 a carton, ranks No. 32 in the country, according to 2008 numbers from the Federation of Tax Administrators. Boosting the levy by $10 per carton would push the Silver State into the No. 10 spot for cigarette taxes. That would be bad for business and the state's income, Cowan said.

"If the state goes ahead (with the $10-per-carton increase), it will be suicide," Cowan said. "They won't get anywhere near the expected revenue."

For now, business is good at the Las Vegas Paiute Tribal SmokeShop. The store on Tuesday had five cash registers going, with lines queueing up behind each station. The drive-through had constant business too as customers looked to stock up before Wednesday's higher tax hit. Cowan said the store's sales volume this month will be nearly double the sales it rang up in 2008.

But Cowan said he's bracing for a big downturn in April.

The federal tax increase probably will force a 6 percent to 10 percent decline in the number of smokers, some of whom will never return to the habit, he said. The typical smoker could cut his cigarette consumption in half, at least at first, Herrawi added.

April will bring a big drop in customers because smokers have stockpiled cigarettes ahead of the tax increase.

The average smoker is buying at least 11/2 times her usual number of packs in the weeks leading up to the change, Cowan said. Even smokers who stick with their habit will change how they consume, perhaps moving toward cheaper, generic brands.

"I have no problem with the reason they're raising taxes on a federal level, to pay for children's health care," Cowan said. "I'm not anti-tax on cigarettes, but there comes a point where you have to ask if the ends justify the means."

A quick survey Tuesday of shoppers at the SmokeShop found they all plan to alter their habits in ways that could mean less revenue for the federal government, and they said they probably would modify their consumption if a state increase happened, too.

It would be tough to quit, Wagner said, but he already has switched to cheaper brands, lopping about $12 off the $28 he is used to spending.

"I think they better look long and hard at what they're doing," Wagner said. "It's a little ridiculous. They will probably knock out a number of smokers, and they won't really gain anything, other than having some hot-tempered smokers."

Las Vegan Joanne Motto said the new federal tax has her planning to buy cheaper cigarettes, but a substantially higher state levy just might persuade her to nix her 50-year habit. Previous tax jumps didn't make her change her behavior, but "now it's getting out of hand," she said.

Still, smokers and smoke shop managers agree convincing people to kick the habit is a laudable goal.

"It's perfectly legitimate to discourage people from smoking," Cowan said. "Let's face it: Smoking is a health hazard. I don't think anyone argues that."

Leslie countered that prior tax increases also yielded concerns about gains in job loss, crime and smuggling.

"To my knowledge, many of these fears ... were generally not realized," Leslie said, but she acknowledged that previous tax boosts were smaller, and the economy wasn't in recession when they passed.

Contact reporter Jennifer Robison at jrobison@reviewjournal.com or 702-380-4512.