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Tobacco Store Owners Feeling Pinch Of Tobacco Hike

Margaret Walker’s angst is rising with the fall in business she says has been all too evident at the eastern Arkansas tobacco store she and her husband run since increases in state tobacco taxes went into effect last week.
Newspaper ads Mississippi tobacco stores are running inviting Arkansans to “drive a little and save a lot” just add to her anxiety, Walker said, because she feels customers are driving across the border to take them up on their offer of cheaper tobacco products.

Larry Cobb, retail operating supervisor of Forrest City-based Tobacco Superstores Inc. knows firsthand. His company owns some of the Mississippi tobacco outlets doing the advertising.

“We know that people have been doing it and are going to keep doing it,” Cobb said. “I’m losing money in my stores in Arkansas. But if they’re going to do it, I want them to go to my stores in Mississippi.”

Arkansas’ tobacco tax increased by 56 cents a pack March 1, and a correspondent hike in the levy on smokesless tobacco also went into effect as a result of Gov. Mike Beebe’s successful push for the tax hikes to pay for a statewide trauma system and other health program in his $86 million health care package.

Supporters say the programs paid for by the tax increases will save lives and improve the overall health of Arkansans.

But store owners and others statewide are complaining.

J.R. Thomas, director of the Tobacco Control Board, said the agency has been flooded with calls since the tax increases went into effect. Tobacco store owners say the tax hike is “killing their business,” he said.

Walker says her store could very well go under after a 61-cent federal tobacco tax goes into effect April 1.

“I live in a very poverty-stricken area,” said Walker. “Many of my customers are poverty-stricken, but now the cheap cigarettes cost as much as the premium products used to cost.”

At Little Rock’s Tobacco Superstore, store manager Brian Nobles said the business’ most popular and most purchased cigarette is Marlboro. Prior to the state hike, a pack of Marlboros cost $3.55 per pack and $34.91 per carton. Now they cost $4.17 per pack and $41.18 per carton. The federal tax increase is included April 1, the cost of a pack of Marlboro will be $4.79 per pack and $47.38 per carton.

Nobles said the store’s cheapest cigarette currently is the brand Shields currently at $28.66 per carton, while their most expensive brand is Benson & Hedges at $57.93 per carton.

Nobles agreed with Walker that the cheapest brands after the federal hike will cost as much as the premium brands cost prior to the state hike.

A Beebe supporter in his 2006 campaign, Walker said she feels she’s been blindsided by the governor.

“I’ve tried to get in touch with his office several times, him and (House Speaker) Robbie Wills,” she said. “I typically vote Democrat, and I never thought I’d say this, but I’m probably voting Republican from now on.

“I curse the day I voted for Beebe.”

The governor says the statewide trauma system and various health programs paid for by the tax increases will benefit Arkansans equally, smokers and the poor included.

“The governor wants to offset the high costs of taxpayer money that pays for tobacco-related illness with a program that will also deter smoking,” Beebe spokesman Matt DeCample said. “From the business aspect, this is just another case in which a business requires adaptability in order to thrive, and is just another challenge.”

But Greg McGee, owner of the Pipe and Tobacco Shop in Little Rock, said the tax burden was too heavy, particularly on top of the federal increase to come.

“For every dollar we make, 68 cents of it is going back to the government. It’s criminal,” McGee said. “We’re definitely not against trauma systems. But such a dramatic tax increase will kill business.”

Smokers had mixed emotions about the tax hike.

Joseph Johnson, 27, of Little Rock, said cigarettes should be taxed to a certain extent, but he said the 56-cent increase is extreme.

“I just don’t think it’s fair to only tax cigarette smokers,” Johnson said. “I mean, I’m not against all taxes, but that’s a lot to just weigh on smokers. And it’s supposed to be for everybody.”

Longtime smoker Lisa Jones, 56, of Little Rock, said she is for the tax hike, not just for the health programs but also for the deterrent to smoking.

“A tax increase like that will make a lot of people think twice before buying cigarettes, myself included,” Jones said. “I don’t see why they don’t just make it illegal. I know they want the health programs, but (smoking is) just so terrible.”