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February,
2009

U.S. Voted for Change, but for Tobacco it’s Either Change for the Worse, or Business as Usual

It’s a new year with a new a new Congress, a new President, and plenty of shifting momentum on the slate of issues affecting the tobacco retailing industry. Only a few weeks into 2009, change has indeed come quickly; not surprisingly, most of that “change” has been for the worse, even if most of it was anticipated. There have been a few surprise cracks of light. The story so far:

  • President Barack Obama promptly signed the hastily-approved SCHIP expansion bill which, after an intensive year of lobbying, offered up “survivable for most” tax increases for the premium cigar industry, but a stiff blow to the little cigar segment. From out of left field, the RYO segment was blindsided with an astounding 2,100% increase.

  • As if the science surrounding second-hand smoke—which has fueled tough no-excemption smoking bans—wasn’t inconclusive enough, medical professionals have now moved on to coin the term “third-hand smoke” to describe the lingering substances that remain on a smoker’s clothes or the surfaces of a room long after the smoking is over. The study offered no scientific analysis of health risks, but merely surveyed people’s attitudes towards the following statement: “Breathing air in a room today where people smoked yesterday can harm the health of infants and children.” This has, of course, set off a firestorm of speculation as to what, exactly, is the definition of third-hand smoke.

  •  Perhaps it’s the tough economy spawning a renewed interest in the plight of struggling small business, or just a realization that accommodating the small minority of smokers in some manner is just good for business, but some legislators have been lending an unusually sympathetic ear to efforts to ease highly-restrictive smoking bans to allow new cigar establishments (Colorado); smoking in tobacco shops and smoking lounges (Long Beach, Calif.); and even smoking on outdoor patios in Lexington, Ky. Are these signs that draconian, over-the-top bans can be painted as utterly unreasonable and open to re-evaluation?

  • Massive tax hikes aren’t the magic bullet they are so often portrayed to be. A new study by the Michigan-based Mackinac Center for Public Policy shows that tax-induced cigarette smuggling is occurring in 47 of the 48 contiguous states. As a result, the potentially higher revenues from tax hikes often don’t materialize or unintended consequences often limit the value of any new tobacco tax money. The top states for cigarette smuggling in 2006 were Rhode Island (45.7 percent), New Mexico (42.4 percent), and Washington (42.3 percent). All three states have raised their cigarette excise taxes since 2003.

    With another 11 months yet to go, 2009 promises to deliver far more revelations.

    E. Edward Hoyt III