Convenience Stores Say Tobacco Taxes Are Killing Them

Minnesota stores are selling less of these. Is that good or bad? Depends who you ask.

Minnesota stores are selling less of these. Is that good or bad? Depends who you ask.

You have to consider the source, but a new study funded by a consortium of the Minnesota Wholesale Marketers Association, a bunch of gas stations, and big tobacco finds that the increased cigarette and tobacco taxes that went into effect last year are having a devastating impact on businesses.

The tax, which increased the cigarette excise tax by 130 percent and the tax on other tobacco products from 70 percent of the wholesale price to 95 percent, has cost 1,100 jobs, resulted in a 50 percent decrease in tobacco sales along Minnesota's borders, and decreased non-tobacco product sales by $38 million.

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In a news release, Bruce Nustad, president of the Minnesota Retailers Association, says, "We knew, once the legislature made our tax the highest in the region, there would be some job losses and maybe a few stores closing... But this study shows just how devastating the massive tobacco tax has been across Minnesota, for adult consumers, retail businesses, and their employees."

The release notes that convenience stores in Minnesota communities bordering other states have been hardest hit, as smokers drive to Wisconsin, Iowa, or the Dakotas to buy cheaper smokes, and that things will only get worse due to automatic increases in tobacco taxes:

Numbers released this week by the Minnesota Department of Revenue show that the state sales tax and new annual automatic inflation adjustment tax on cigarettes in 2015 will be a total of 8.4 cents per pack or 84 cents per carton. This includes the state cigarette sales tax increase of 1.4 cents or 14 cents per carton and a new automatic inflation adjustment tax increase of 7 cents or 70 cents per carton.

That number could be as high as 10 cent per pack or $1 per carton in 2017, which could raise the total state tax on cigarettes to $3.12 per pack or over $30 per carton. That would be over $26 dollars higher per carton tax than just across the border in North Dakota and over $15 dollars per carton more than South Dakota and over $17 more per carton in Iowa, according to the association.

Then again, nobody ever pretended tobacco tax increases would be good for convenience stores. Just before the new taxes went into effect last year, Bob Moffitt, director of media relations for the American Lung Association in Minnesota, told us it was all about saving lives.

"Considering that 90 percent of chronic obstructive pulmonary disease cases and lung cancer cases are directly tied to smoking, if there's anything we can do to bring down the smoking rate, we're going to save an awful lot of lives," Moffitt said. "If we run the numbers, a $1.60-per-pack tax increase is going to save about 47,000 Minnesota kids from getting addicted."

h/t -- Brian Lambert

Send your story tips to the author, Aaron Rupar. Follow him on Twitter @atrupar.