Cigarette Tax Has Far-Reaching Effects

Outcasts in a health conscious society, Connecticut smokers soon could face even more pressure to quit or figure out how to continue their increasingly costly habit.

Backed by the governor and Democratic legislators, a proposed 45-cent increase in the state cigarette tax to $4.35 per pack would place the state in a tie with New York for the highest smokers' tax in the nation. Republicans, however, have not included the tax hike in their two-year spending plan.

If the cigarette tax increase does get into the final budget, both the legal and illegal markets would feel the effect. To what degree is the question.

Would more people kick the habit because of the untenable expense (the average price per pack in the state now is $9.52)? Or would more smokers seek cheaper butts outside Connecticut and from under-the-table retailers, providing a windfall for other states and smugglers?

Some Connecticut smokers say they have had to adjust their habit as the price of a pack continues to rise.

Micheal Banks, 71, of Manchester, said he has smoked since age 18, but lately he's been trying to "bring it down." Inhaling a menthol Monday while waiting for his wife outside a local supermarket, Banks said he had been smoking a half-pack a day, "but that was costing me."

The retired data processor said he's down to seven cigarettes a day and plans to cut that to five and then three and eventually stop altogether. At $8.39 per pack, Banks said Pyramids are the cheapest smokes he can find. His wife won't let him light up in the house, he said, and the likelihood of a tax hike just adds to the increasing pressure to stop.

Kimberly Stephens, originally from Meriden but now living in Hartford, said she started smoking Newports about six years ago, but the last tax hike prompted her to switch to Black & Mild cigars. Stephens said she smokes about four cigars a week, but would still be smoking Newports if she could find them at a cheaper price.

Maureen G. of Manchester, 61, who would not give her last name, said she has smoked for 40 years. Her brand is Misty, which cost $9.68 a pack, and she smokes a pack and a half a day.

"It's a car payment," she said of the roughly $440 she spends every month on cigarettes.

A nice car.

Maureen said she would like to quit and the tax hike would make that even more likely.

"The evidence is clear," said Jim Williams, a spokesman for The American Heart Association, "cigarette sales have dropped sharply in states that raised the tax rate.

"The average state cigarette tax is now $1.71 per pack," Williams, who is based in Wallingford, said. "That has nearly quadrupled since 2002, when the average was 43.4 cents."

Hiking cigarette prices is "one of the most effective tobacco control interventions," according to the 2014 surgeon general's report. For every 10 percent boost in the price of cigarettes, there is a 3 percent to 5 percent decrease in consumption, according to the Heart Association. That same price increase has been shown to cut smoking among children by up to 7 percent.

"That is why it is critical that the Connecticut legislature substantially raise the price of tobacco products, as the Association and our partners have advocated," Williams said.

To have an effect, however, the increase should be $1.50 a pack, he said, calling the proposed 45-cent hike inadequate.

"This low amount will not result in a positive impact on health; rather it is simply a way for the state to raise additional revenue," Williams said.

The Glastonbury town council recently approved an ordinance barring the use of tobacco products at town-owned recreation areas. The rule, Town Manager Richard J. Johnson said, reflects the determination that "smoking and tobacco shouldn't be in areas where people assemble."

Cigarette smoking is the leading cause of preventable disease and death in the U.S., accounting for more than 480,000 deaths each year, or 1 of every 5 deaths, according to the U.S. Centers for Disease Control and Prevention.

Smoking has declined from nearly 21 percent of Americans in 2005 to about 15 percent in 2015, the agency reported. In Connecticut, 13.5 percent of residents age 18 and older were smokers in 2015, according to the federal agency.

In fiscal year 2011-12, after the cigarette tax was hiked from $3 to $3.40 per pack, revenue totaled about $411 million. But that number has decreased over the past several years, even with new tax hikes in 2015 and last year that brought the total tax to $3.90 per pack. In fiscal year 2015-16, total revenue was about $361.6 million.

The proposed 45-cent hike was projected to generate about $66 million over two years, not including the increase in sales tax receipts. The money would be combined with other tax increases and spending cuts in the Democratic plan to help close a projected two-year deficit of $3.5 billion. Republicans, however, have rejected the Democrats' proposed tax hikes.

Cigarette taxes benefit public health because more people are forced to quit, but the taxes "are really poor budget tools," says Scott Drenkard, state program director with The Tax Foundation.

"You have budget difficulties when people make the right choice for their health, and you can see the tension in this sort of problem," Drenkard said.

"This particular tax increase might provide a momentary bump in revenue," Drenkard said. "(But) a lot of Connecticut's problems with the budget are structural and need to be addressed with more far-reaching and comprehensive tax reform and then also an honest conversation about spending liabilities and particularly, pension liabilities."

There's also the question of whether tax hikes force more people to buy their cigarettes out of state or on the illegal market. Jaimin Patel, owner of Carolina Tobacco Emporium in Manchester, said some of his customers already buy a three- or four-month supply of cigarettes from New Hampshire, where the average price is $6.64 per pack, the lowest price in New England. Those smokers only come to his store, Patel said, when they haven't had the chance to replenish their stocks out of state. He said Connecticut will end up losing money with the latest increase.

Virginia, where the average price per pack is $5.25, is among the favorite states for cigarette smugglers to load up their vans and trucks and head back to Connecticut and New York.

The recent seizure of 3,601 cartons, including many from Virginia, and the arrest of a Hartford man shows how lucrative the illicit trade can be, officials of the state Department of Revenue Services said. The suspect, Wilberto Diaz, told investigators that over the past three years, he sold 800 cartons a week to small stores for a profit of about $1,000 a week, a DRS spokesman said. The lost excise tax on those cigarettes totaled about $4.8 million.

Brice O'Brien, an executive vice president at Reynolds American Inc., wrote in a letter to Connecticut lawmakers earlier this year that the 45-cent tax hike would cost the average adult smoker an additional $91 per year. The company also charged that the higher price could lead to other problems.

"If the state raises its cigarette tax by $0.45 per pack, a smuggler would make approximately $1.8 million by transporting one tractor-trailer load of cigarettes from Virginia," O'Brien wrote. "According to the Mackinac Center for Public Policy (www.mackinac.org), Connecticut has the 10th highest inbound smuggling rate in the country.

"By equalizing the state's tax with New York's," he wrote, "Connecticut risks creating the opportunity for increased smuggling into the state.''

A team of 12 police officers at the DRS, called the criminal investigations division, investigates various kinds of fraud, including tobacco smuggling. Investigations often cross state borders.

"There's no doubt that we have upped our game and we have put more resources behind this," agency Commissioner Kevin B. Sullivan said. "Nationally, we cooperate more than we ever did."

There's a link between illegal cigarette sales and organized crime, and with terrorism, Sullivan said.

"That's one of the reasons the feds have been much more on top of this – because of the 'who's' involved in the business these days," he said.

A U.S. Department of State report in 2015 found that tobacco smuggling "fuels transnational crime, corruption and terrorism."

"Illicit tobacco provides a significant revenue stream to illicit actors without the high risks and punishments associated with trafficking in narcotics or humans," the report said.

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