Higher Taxes = Criminal Enterprise

Published in CSP Daily News

Florida c-store officials argue against cigarette tax

TALLAHASSEE, Fla. -- Convenience-store operators and wholesale distributors said Friday that arguments that a Florida state cigarette tax increase would reduce smoking were full of hot air, claiming instead that the proposed $1 extra levy on smokes would drive price-conscience consumers to buy from bootleggers, according to a report by the News Service of Florida.

To make their point, the Florida Petroleum Marketers and Convenience Store Association and the Florida Wholesale Distributors Association drove three heavy duty vehiclesan 18 wheeler, a moving truck and a cargo [image-nocss] vanto the Capitol courtyard. They said the three trucks could easily be stuffed with contraband cigarettes if lawmakers proceed with the push to increase the tax this year.

The state cigarette tax is currently 33.9 cents per pack of common-sized cigarettes. But with the state facing a deficit that could be as high as $6 billion, backers project that raising the cigarette tax by $1 would bring in just more than $1 billion per year in revenue.

Buoyed by a 2008 study completed by the Michigan-based Mackinac Center for Public Policy that tracked cigarette smuggling in the United States, the organizations said cheaper cigarette taxes in Georgia, Alabama and South Carolina could create a million-dollar black market for Florida smokers.

In South Carolina, the cigarette tax is only 7 cents a pack, the lowest in the nation. Georgia has a 37-cent tax and Alabama a 43-cent tax. The organizations said the cargo van alone, the smallest vehicle on display at the Capitol Friday, could bring $100,000 worth of cigarettes to from South Carolina to Florida. They said a semi-trailer could hold $2.5 million worth of contraband cigarettes.

"The goal, as stated by the Legislature, is to reduce smoking and increase funds for the state of Florida," Jim Smith, president of the Petroleum Marketers and Convenience Store Association, said, according to the report. "We find it difficult to understand how you can regulate personal decisions through someone's wallets. But more importantly, we think that people need to understand the unintended consequences of this legislative effort."

Smith said cigarette tax opponents can't quarrel with supporters' argument that increasing the cigarette tax would curtail smoking some, though he said a larger chunk of the decrease would be people who simply stopped buying their cigarettes legally.

"There's no doubt some are going to quit; you can't argue that point," Smith said. "However, the vast majority are going to seek other avenues for their purchasing habits, whether it's driving across the border to Georgia or Alabama or sitting in your living room and clicking the Internet at one of 500 sites where you can buy cigarettes tax free, or perhaps buying contraband cigarettes, which would be the biggest loss for the Florida economy. We're taking dollars out of the state."

Smith also said that raising the cigarette tax would hurt convenience stores, which rely heavy on tobacco products for viability. Smith said 24% of convenience-store operators' profits come from tobacco products.

David Shepp, executive director of the Florida Wholesale Distributors Association, said cigarette sales are responsible for 10,000 retail jobs in the state of Florida, which has an unemployment rate of 8.6%. Shepp said a $1-per-pack tax increase would cost 2,400 Floridians their jobs.

"Businesses across the state are hurting now," Shepp said. "The idea that you would raise taxes during a recession is amazing to me. Cigarettes are the No. 1 product that we sell. Like it or not, tobacco sales provide economic benefit to this state."

Cigarette manufacturers are making the same arguments. Their representatives have been making the rounds in Tallahassee, Fla., giving the smuggling warning. In addition to arguing that people in north Florida might go other states, they also point to Indian reservations as an alternative source for cigarettes that wouldn't be subject to the higher tax.

Shepp also argued that raising the tax would increase illegal cigarette consumption.

"Government through higher taxes is creating a criminal enterprise," he said. "I know we'll never be able to stop criminals from being able to conduct their business, but we can stop the Legislature from giving them more incentives to become criminals."

But Sen. Ted Deutch, who pushed unsuccessfully for a cigarette tax increase last year and has filed legislation (S.B. 1840) again this year, said opponents were exaggerating their claims.

"It's one thing to grossly exaggerate the impact of cross-border sales, which common sense dictates would be as minimal here as any state given our geography and population centers," Deutch said in a statement shortly after the opponents finished their news conference," according to the report. "But it's absolutely reckless to employ scare tactics on Floridians by inventing an infusion of violent crime in a desperate attempt to fight, of all things, a measure everyone knows will save lives rather than endanger them."

Deutch's cigarette tax bill has been referred to the Finance and Tax, Health Regulation, Higher Education, Health and Human Services Appropriations, and the Policy & Steering Committee on Ways and Meansa difficult path in a two-month session.