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OK, so what’s your solution then? (Part 59,482)

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Illinois

* I have some late breaking news for the Alton Telegraph editorial board: Most Metro East residents already drive across the river for their big cigarette purchases. The tax hike won’t make all that much of a difference…

But the tax increase surely will reduce revenues for thousands of businesses in Illinois counties that border neighboring states with lower taxes on cigarettes. That particularly applies to those counties that border Missouri, which has the lowest tax on cigarettes of any state at just 17 cents.

It’s a nightmare scenario for convenience stores and gas stations in cities such as Alton, where shoppers can take a short drive across the Mississippi River to find cheaper smokes in Missouri. Up until now, the difference between the states’ cigarette taxes amounted to 81 cents per pack, which might not be enough to drive a smoker to make that trip. But if the smoker buys cigarettes by the carton, 10 packs at a time, the difference already is roughly $8 per carton. And when the new Illinois tax kicks in, retailers here will have to charge some $18 more per carton than their counterparts in Missouri.

When you add that to the fact that gasoline consistently sells for 20 to 25 cents less per gallon in Missouri, because Illinois also imposes a sales tax on the fuel, retailers in border areas of our state are facing disaster. Thousands of customers will go across the state line to buy their cigarettes and gas up their cars, and while they’re visiting the convenience stores in the Show-Me State, they’re likely to buy a few snacks and beverages, as well, further cutting Illinois’ sales tax revenues.

If they’re not already crossing the bridge with an $8 a carton difference, then they’re just plain silly. There’s no way to compete with a 17 cents per pack cigarette tax without really hurting our own revenues and encouraging more smoking. And statewide policy should not be made to benefit one, smallish region.

Yes, this cigarette tax hike will have an impact. But it will be relatively small - not the “nightmare scenario” envisioned by the Telegraph. That cig business has already been lost.

I’ve been spending a lot of time in the Metro East lately (partly because there are some big upcoming races there and I’m attempting to further boost my knowledge of the region in advance). I’m happy to report that there appear to be thriving convenience stores everywhere, so they seem to be weathering the border competition pretty well so far.

* And what would the Telegraph have done with Medicaid restructuring without that $700 million in revenue from the cigarette tax? Would they have cut funding even more for their local hospitals, which pay far higher salaries and create much better jobs than convenience stores? Or would they have kicked even more people off health care, which would’ve most certainly hurt their purchasing power and caused an even greater ripple effect on local businesses?

It’s really easy to complain and predict the end of the world every time the General Assembly passes a bill. It’s a whole lot tougher to actually solve the very real problems of the day.

posted by Rich Miller
Monday, Jun 4, 12 @ 10:33 am

Comments

I’m not so sure that the margins on cigarettes are all that profitable, unless you’re selling without the proper tax stamps.

It’s like gasoline; the margins for the stations aren’t great, but it brings you in to purchase high-margin products like pop and chips.

Comment by wordslinger Monday, Jun 4, 12 @ 10:48 am
Yeah, they really need to just jump across the Clark Bridge and stop off at the gas station right on the MO side. The last time I was there I counted 15 cars with IL plates and none with MO.

Comment by MontgomeryCo Monday, Jun 4, 12 @ 11:11 am
They also are assuming that Missou will keep its low cigarette tax forever, not necessarily a good assumption. Illinois’ big hike of cigarette taxes gives neighboring states the opportunity to raise their own cigarette taxes, and still be below Illinois. And cigarette taxes do tend to be popular.

Missouri is in fact considering raising their cigarette tax:
http://www.pitch.com/plog/archives/2012/05/24/missouris-cigarette-tax-may-not-be-the-lowest-in-the-nation-for-long-judge-upholds-cigarette-tax-hike-ballot-language

While Missourians have voted these down in the past, cigarette taxing is becoming more popular, so I wouldn’t bet against it.

Comment by Robert Monday, Jun 4, 12 @ 11:45 am
Cigarettes will be gone in 10 years. Tax them now to speed up the process.

Comment by tomhail Monday, Jun 4, 12 @ 12:12 pm
People were staying closer to home for their cig purchases when the price of gas was through the roof. Now that its coming down they will cross the border for not just cigs…groceries, booze, etc. as long as they’re making the trip…you self-righteous do-gooders have put the bone to the border counties once again.

Comment by Burning Down da House Monday, Jun 4, 12 @ 12:23 pm
“And what would the Telegraph have done with Medicaid restructuring…”?

Um, I forgot—how many votes does the Telegraph have in the Illinois legislature?

Comment by benevolent hegemon Monday, Jun 4, 12 @ 12:49 pm
The border states will wake up and realize they
can still tax at 50 cents more and still attract
a crowd.Winners are those who quit smoking, and save their money.

Comment by mokenavince Monday, Jun 4, 12 @ 1:08 pm
Plus when you quit it’s bound to improve your health.

Comment by mokenavince Monday, Jun 4, 12 @ 1:10 pm
The vehicle, from near Springfield, that has been making one trip a week to St. Louis will soon be making two trips per week.

Comment by Hickory Monday, Jun 4, 12 @ 2:13 pm
Rich, which upcoming races in the Metro East are you watching?

Comment by East Sider Monday, Jun 4, 12 @ 2:25 pm
@ Hickory - I cannot imagine that you are even breaking even on weekly trips to STL from outside SPI. Even at $18/carton savings, it would take what, 4 cartons to just break even on gas? That assumes a reasonably sized car, if it’s an SUV, you’re looking at 6-8 cartons, easy.

Sure, you fill up for cheaper there, but all in all, you’re not saving much money. You’re spending a whole lot of time driving to avoid paying some taxes. Or you’re making a run for all of your buddies and potentially breaking laws by illegally selling cigarettes.

I’ve said it before and I’ll say it again, there will be an initial dip in border sales that will last for a month, maybe two, and then sales will be back where they were before. It’s well and good to plan ahead and do trips like that, but smokers just aren’t going to skip picking up a pack when they’re out. Eventually, your carefully crafted schedule will get disturbed and old habits will set in and you’ll realize it’s been 3 months since you made a smoke run.

Come back in October with hard numbers showing the sales decline and I’ll be more than happy to eat my digital hat. You name the bet, I’ll be here.

Comment by Colossus Monday, Jun 4, 12 @ 2:37 pm
Cigarettes will be gone in 10 years. Tax them now to speed up the process.

To be replaced with “funny cigarettes”, also to be taxed.

Comment by Six Degrees of Separation Monday, Jun 4, 12 @ 2:46 pm
^ This.

We need to start talking about how we can both save money and increase revenue without negatively impacting public safety.

Comment by Colossus Monday, Jun 4, 12 @ 2:48 pm
===which upcoming races in the Metro East are you watching? ===

At least three. You’ll have to subscribe to find out more, I’m afraid.

Comment by Rich Miller Monday, Jun 4, 12 @ 2:52 pm
“Or you’re making a run for all of your buddies and potentially breaking laws by illegally selling cigarettes.”

Almost sounds like the premise for a new Smokey and the Bandit flick…

Comment by Secret Square Monday, Jun 4, 12 @ 3:16 pm
===Um, I forgot—how many votes does the Telegraph have in the Illinois legislature? ===

So, they shouldn’t say what they’re for? They should only whine about stuff they don’t like and obviously don’t fully understand?

Comment by Rich Miller Monday, Jun 4, 12 @ 3:23 pm
I’ve lived in the Alton area most of my life and I smoked a lot of those years. People have been going across the bridge to get cigarettes for as long as I can remember. Also, The Telegraph has been throwing up it’s arms over issues like this for as long as I can remember. Some things just don’t change.

Comment by Coyote Chris Monday, Jun 4, 12 @ 3:23 pm