Excise Tax Causes Spike In Cigarette Prices

By: Natasha Trelfa Email
By: Natasha Trelfa Email

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This increase is actually part of a federal plan, with the money geared at covering health-insurance for low-income children. While the increase wasn't supposed to happen until April 1st, prices are already jumping as manufacturers prepare to pay their own tax.

"They're looking around town, because not everyone has done their price increase," said Craig Crawford, who owns a local smoke shop and liquor store.

The price hike on tobacco wasn't supposed to hit for another couple of weeks, but Crawford said he's already noticing the difference in business.

"The price increase was Monday and it's slowed up about 20 to 30 percent or more," said Crawford.

"It always affects you. You don't like paying. I wish I could quit," said Scott Taylor, who buys products to roll his own cigarettes.

In Kansas, packs of cigarettes jumped $0.79. The price of a carton of smokes went up more than $7.00. Around the country, some states are seeing spikes as high as $2.75 for a single pack.

"I've never seen it to where we had this big of a price increase."

The key behind the jump is a federal excise tax of $1.00 on tobacco products slated to hit April 1st. That money is expected to help pay for the expansion of SCHIP. But prices are spiking now as manufacturers prepare to pay a floor tax due on April 1.

The increase, and it's purpose, has left some with mixed emotions.

"It sounds good in theory, but everybody knows by the time it reaches us, there's really no money left," said Sean Gates, who's not a smoker.

"I think these things are kind of necessary," said Matthew Combs, who does smoke.

Crawford said he expects to see a $4,000 to $5,000 hit on his inventory. All retailers will pay taxes on their inventory on later this year. For now, they're just waiting to hear more from the government as they try to figure out just how much customers are willing to pay.

"It's kind of a guessing game right now," said Crawford.

If you'd like to learn more about what the excise tax means for each state, click on the link below.

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