Massive Tobacco Tax Increase by Congress Spells Even More Economic Disaster for Jobs...

Massive Tobacco Tax Increase by Congress Spells Even More Economic Disaster
for Jobs and State Economies
EDITOR'S NOTE: To see how much money your state stands to lose if the federal
excise tax on cigarettes and tobacco products is increased, please see the
included chart.

MINNEAPOLIS, Jan. 12 /PRNewswire/ -- In an urgent message to Congress and
President-Elect Barack Obama, the National Association of Tobacco Outlets
(NATO) and two other national wholesale trade associations have taken out an
ad warning of "economic disaster" for state economies and American jobs should
tobacco taxes be raised to fund the expansion of the State Children's Health
Insurance Program (SCHIP).
"The politicians in Washington who are pushing for a punitive 156 percent
increase in cigarette taxes and even higher tax increases on other tobacco
products will exacerbate the current deep recession through the loss of up to
117,000 union and non-union jobs and at least $1.8 billion annually in lost
revenues for the states," said Tom Briant, NATO's executive director.
The U.S. Labor Department reported just last week that the national
unemployment rate jumped to 7.2% with another 524,000 jobs lost in December
alone. "Why would any member of Congress and President-Elect Obama support a
huge tax increase that will only serve to put another 117,000 Americans out of
work?" inquired Briant.
"During these recessionary times, and as Obama has publicly stated, the
government needs to do everything possible to protect and 'save' jobs plus
stabilize existing sources of revenue," Briant said. "Using tobacco taxes to
fund health care for the middle class would have just the opposite effect."
Briant, whose organization represents tobacco retailers throughout the
U.S., said, "Unlike Wall Street financial firms, the retailers, wholesalers
and manufacturers of tobacco products, which employ almost 1.2 million
Americans, are not asking for a government bailout, but we are asking that our
chances for survival not be torpedoed by a huge tax hike in these turbulent
economic times."
When cigarette prices rise due to tax increases, legal tobacco sales
decline. Lower sales mean lower profits for tobacco retailers and
wholesalers, driving job losses. As legal sales decline, the states collect
less revenue from both state tobacco excise taxes and sales taxes on these
purchases. The states also lose income from annual payments they receive from
tobacco manufacturers through the Master Settlement Agreement (MSA), reached
in 1998. To date, states have received more than $8 billion in MSA payments
since 1998, but those payments are based on the number of cigarettes sold. As
sales decline, MSA payments to the states decline.
"This tax increase will also give additional impetus to the illegal sales
of tax-free tobacco products on the Internet and from the black market, which
are already huge problems for law enforcement in many states," Briant said.
"This tax hike will be a 'bailout' for the smuggling industry, but not for
legitimate small, family-owned retail and wholesale businesses."
Briant noted that higher taxes also put the safety of retail and transport
employees at risk. "Delivery truck drivers and retail store clerks are in
danger when criminals target higher-priced tobacco products the way gangsters
targeted alcohol during prohibition," he said. "It's not uncommon to hear of
stores robbed only for the cigarettes -- the cash register is left untouched.
"President-elect Obama also needs to be reminded that he promised during
his campaign not to raise taxes on anyone making less than $250,000 a year,"
Briant said. "Yet, virtually every smoker in the country makes less than
$250,000 a year. Clearly, this huge tax increase would be a violation of the
president-elect's campaign promise.
"Congress and President-Elect Obama need to fund the expansion of SCHIP in
a responsible manner without putting another 117,000 Americans on the
unemployment rolls," said Briant.
Contact Information:

Thomas A. Briant, Executive Director
National Association of Tobacco Outlets
15560 Boulder Pointe Road
Minneapolis, MN 55347
Office: 1-866-869-8888

EDITOR'S NOTE: The below table provides the estimated loss of state
excise tax revenue and MSA payments by state if the federal excise tax on
cigarettes and tobacco products is increased.

Estimated Losses To States If $.61 Federal Excise Tax Increase Passes
(dollars in millions)

State Treasury Est CBO Est

Alabama 22.78 20.25
Alaska 6.64 5.91
Arizona 43.34 38.53
Arkansas 15.84 14.07
California 148.67 132.15
Colorado 24.54 21.81
Connecticut 35.59 31.63
Delaware 16.47 14.64
Florida 69.14 61.46
Georgia 33.47 29.75
Hawaii 10.35 9.20
Idaho 6.58 5.85
Illinois 65.61 58.32
Indiana 70.96 63.07
Iowa 35.59 31.63
Kansas 14.60 12.98
Kentucky 26.55 23.60
Louisiana 25.09 22.31
Maine 14.05 12.49
Maryland 47.66 42.36
Massachusetts 60.56 53.83
Michigan 90.74 80.65
Minnesota 37.03 32.92
Mississippi 13.61 12.10
Missouri 22.16 19.70
Montana 8.27 7.35
Nebraska 9.29 8.26
Nevada 14.79 13.14
New Hampshire 19.83 17.62
New Jersey 62.23 55.32
New Mexico 8.75 7.78
New York 149.09 132.52
North Carolina 36.52 32.46
North Dakota 4.89 4.34
Ohio 101.42 90.15
Oklahoma 32.23 28.65
Oregon 25.66 22.81
Pennsylvania 106.92 95.04
Rhode Island 10.92 9.71
South Carolina 9.52 8.46
South Dakota 8.62 7.66
Tennessee 52.78 46.73
Texas 196.08 174.30
Utah 8.33 7.41
Vermont 7.44 6.62
Virginia 26.64 23.68
Washington 38.61 34.33
West Virginia 15.99 14.22
Wisconsin 57.59 51.19
Wyoming 3.90 3.47

Total 1,973.93 1,754.43

SOURCE National Association of Tobacco Outlets

Thomas A. Briant, Executive Director, National Association of Tobacco Outlets,
+1-866-869-8888