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Tobacco tax increase: Quit or buy out of state?

Published: Thursday, July 1 2010 1:29 a.m. MDT

SALT LAKE CITY — When the federal cigarette tax went up 61 cents last year, the Utah Tobacco Quit Line was flooded with calls from smokers who were ready to stop.

Now, even more tobacco users are expected to call thanks to a state tax increase adding another $1 to the price of a pack, starting Thursday.

"The great thing about this tax is you don't have to pay it. You can quit," said David Neville, spokesman for the state Department of Health's Tobacco Prevention and Control Program.

That's what the additional staff manning the Quit Line phones will be ready to explain, he said. And it will be the message of a new advertising campaign that will roll out later this summer.

Using sticker shock to get Utahns to stop smoking — or not to start — was what the chief backer of the only tax increase passed by the cash-strapped 2010 Legislature intended all along.

Sen. Allen Christensen, R-North Ogden, said he's just sorry the increase is only $1.

"It will not stop the habit," he said. "That would take more than I could ever get through the Legislature."

The tax hike, which boosted the state tax on a pack of cigarettes to $1.70, is expected to raise more than $43 million in the next 12 months. Lawmakers approved it only after being threatened with cuts in public education.

Even Gov. Gary Herbert, who at one point had pledged to veto any tax increase, allowed the bill to go into effect without his signature rather than see spending for schools slashed.

"I don't care about the dollars. It's about the health benefits," said Christensen, a pediatric dentist. He's hoping to see about 15 percent of the state's 190,000 smokers give up the habit.

Better yet, Christensen said, the increase means more younger Utahns will be priced out of starting smoking. "They'll never take up the habit, because they just plain can't afford it," he said.

Legislative fiscal analysts calculated that, as a result of the increase, Utah sales of cigarettes and other tobacco products would drop about $54 million from a projected $280 million in the coming budget year.

Opponents of the tax hike warn the lost sales could be much higher, but not because fewer Utahns are smoking. Instead, they fear smokers will head to surrounding states with lower tax rates to make their cigarette purchases, hurting Utah businesses.

Jeanie's Smoke Shop in Salt Lake City already closed its doors this week after decades of business rather than struggle to find customers willing to pay higher taxes not just on cigarettes, but also on pipe tobacco and cigars.

Owner Gary Klc, whose parents opened the store in 1949, said the increase means a $150 box of 25 cigars would cost about $225. "I'm being eliminated," he said. "This has been my life."

Bus driver Shaun Stowe, one of the last customers in the State Street store, said he won't cut back on his weekend pipe smoking. He will, however, likely start buying tobacco online to avoid taxes.

"Nothing will be as fresh or as good," Stowe said "It's a travesty this store is closing."

At 53, he said he's been a regular since his father first brought him there years ago.

Buying cigarettes or other tobacco products online is illegal in Utah, said Charlie Roberts, spokesman for the state Tax Commission. While no one has been prosecuted yet, he said several investigations were ongoing.

What's more likely, according to Sen. Howard Stephenson, R-Draper, are organized trips to border communities in Wyoming, Idaho, Nevada and Colorado to buy cheaper cigarettes.

"People in the apartment house, people in the trailer court will be pooling their resources and taking turns to drive to Evanston for the weekly Evanston cigarette run," said Stephenson, head of the Utah Taxpayers Association.

He called the estimated revenue from the tax increase "funny money" and said the impact of the increase on revenues "will be overnight. As soon as people go to the convenience store and see that price increase, they're going to take action."

Ken Berscheit, owner of Lotty's, a bar, grill and liquor store in Evanston, Wyo., said he's ready. He and other retailers in the border town are stocking up in anticipation of additional customers.

"They'll get in their car and come up for the weekend and stock up on porn and beer and cigarettes," Berscheit said.

Neville, though, said that's just not going to happen.

"They don't understand the psychology of a smoker," the Tobacco Prevention and Control Program spokesman said. "Smokers don't travel to buy their cigarettes. They go to the corner market. It's probably habit more than anything."

e-mail: lisa@desnews.com

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