Despite a 2008 tax increase and the federal tax jump that hit just this spring, Wisconsin is again raising prices on smokers.
The price of a pack of cigarettes will increase by 75 cents to $2.52 cents per pack in Wisconsin tomorrow, Sept.1, the Associated Press reported. The tax will be the fifth highest in the U.S. and the most expensive among neighboring states. Before the increase Wisconsin had the sixteenth highest tax.
In addition to upping taxes, the Legislature also has passed a statewide anti-smoking ban that will take effect on July 5, 2010.
The latest increase comes just two years after a $1 per pack increase in 2008 and on top of the federal tax increase that hit this April, increasing cigarette taxes from 62 cents to $1.01 per pack.
Taxes on other tobacco products are also going up Tuesday in Wisconsin. The chewing tobacco tax goes up to 100% of the manufacturer’s wholesale price and the tax on other tobacco products, including cigars and pipe tobacco, increases 50% to 71% of the wholesale price. The amount of the tax will vary depending on the price of each product: the cheaper the tobacco or cigar, the less the tax. However, the tax on cigars is capped at no more than 50 cents per cigar.
Nationwide, the average price for a pack of cigarettes is $5.12, according to the Campaign for Tobacco-Free Kids.
While health advocates are applauding the increase, retailers along the state boarder where cigarette taxes are much lower in neighboring states, are worried about business. The per-pack tax is just 98 cents in Illinois, $1.36 in Iowa, $1.50 in Minnesota and $2 in Michigan.
Groups representing Wisconsin grocery and convenience stores, along with gas stations, estimate that the tax increase will cut 25-40% of their non-fuel sales. In an ironic twist, many of the stores are replacing the revenue lost from tobacco sales with healthy foodservice alternatives, including salads and fresh foods.
“There’s not 25-40% of the people quitting smoking, obviously,” said Steve Loehr, vice president of operations for Kwik Trip, a convenience store chain with about 355 stores in Wisconsin, Minnesota and Iowa. “They’re finding other places to buy cigarettes.”
The only smokers left are the die-hards who will continue buying no matter how high the taxes, said Julie Yahnke, owner of a Quik Stop in Holmen which is near the Minnesota border. She said she only sells about a carton a day; most buyers in her shop get a pack or two at a time.
Gov. Jim Doyle and the Legislature are anticipating an extra $335 million during the next two years thanks to the tax increase to help with the state’s bottom line. For the current two-year budget, cigarette and tobacco product taxes are nearly 6% of all taxes collected at $1.5 billion. That is fourth highest behind income, sales and corporate taxes, the Associated Press reported.
Money generated from cigarette and tobacco taxes goes into the state’s general fund, which is used to pay most of the expenses related to running the state government.