Texas cigarette tax increased $1 on January 1

(AP) Texas smokers started 2007 with a decision to make. They can pay more for cigarettes, get them elsewhere or perhaps finally quit altogether.

A pack of smokes now costs $1 more as the state rolls out its new cigarette tax hike, signed into law in May to help offset cuts in local school property taxes. The increase was added to the existing 41-cent per pack tax and is first increase in Texas since 1991.

Texas was formerly among the states with the lowest cigarette tax. But the $1.41 tax customers will now pay ranks Texas among the top third. New Jersey levies a nation-high $2.58 state tax per pack.

The state’s new business tax also kicked off on Jan. 1, although the first payments to the state won’t be due until May 2008 and lawmakers could change it in the upcoming legislative session.

Like the cigarette tax, the new business tax is to replace money lost by cuts in local school property taxes. But for now, it’s the cigarette tax that has everyone’s attention, especially smokers.

A pack of best-selling brands like Marlboro will now cost smokers around $4.50, while carton prices will rise between $10 and $12.

“It’s going to really hurt,” said Tobacco Patch owner Philip Rhodes, whose store in Marshall is just a 20-mile drive from Louisiana, where the cigarette tax is 36 cents per pack. “I just have to cut back on my spending, tighten my belt and see what happens.” Supporters of the tax from

Gov. Rick Perry to the American Cancer Society predicts the state will bankroll hundreds of millions in revenue and tens of thousands of pack-a-day smokers

will decide that the extra $365 a year is the last incentive they needed to finally kick the habit.

But discount smoke shop owners like Rhodes, convenience stores and even law enforcement agencies are less certain of the magnitude.

All agree, however, that the extra dollar will be felt from sales to theft to smuggling. Rhodes said a representative from R.J. Reynolds Tobacco Co. told him to expect an immediate 20 percent drop in sales at his shop, which has been in Marshall for 11 years.

That forecast is based on what happened to owners in other states after similar cigarette tax hikes.

Across the state, smokers stocked up on cigarettes to beat the tax increase. Rhodes said his sales volume was up 40 percent in the weeks leading up to the New Year, when he said he’ll

carry only the best-selling brands since many of his customers will begin buying in Louisiana.

States surrounding Texas all have lower cigarette taxes. The New Mexico tax is 91 cents per pack, Arkansas is 59 cents and Oklahoma’s tax is $1.03.

The $1 hike only applies to cigarettes. Taxes on chewing tobacco will increase only about five percent, while cigars are unaffected.

“Statewide, it’s hard to say what people are going to do,” said Doug DuBois, director of membership serves and governmental affairs for the Texas Petroleum Marketers and Convenience Store Association, which represents about one-third of the state’s 10,000 convenience stores. “For $1.41 (a pack), it is not unthinkable for people to drive that two hours from Houston to Lake Charles,” DuBois said.

Less sympathetic are health advocates and state leaders who supported the increase. About 1 in 5 Texans are smokers, and the tax hike will generate an extra $680 million for the state over the next year.

The Cancer Society estimates that for every 10 percent increase in the price of cigarettes, the number of adult smokers drops 4 percent. That would mean more than 100,000 fewer smokers in Texas, where many communities have already passed no-smoking ordinances.

“If young people are growing up in an environment where it’s not acceptable to smoke, they’re going to be less likely to do so,” said Phyllis Gingiss, professor of health education at the University of Houston.

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