Cigarette tax hike 'kills' business for local store owners

PAWTUCKET - A big $1 increase on the state's cigarette sales tax earlier this year, combined with the city's close proximity to nearby Massachusetts, continues to cripple cigarette sales here, say local convenience store owners.

A Pawtucket store owner told The Valley Breeze this week that while businesspeople all over Rhode Island have been hurt by the massive tax increase on cigarettes here earlier this year, those like him who are closest to the Massachusetts border have been hit the hardest.

"It killed us actually," said Mike Eid. The owner of the formerly busy Columbus Mini Mart on Columbus Avenue closed a second convenience store he owned in the city earlier this year in part due to the tax increase.

"It hurt us much more here," said Eid.

Eid claims that what state officials do with their cigarette taxes has a direct impact on surrounding states. When Massachusetts increased its sales tax on cigarettes in 2008, business here increased as Bay Staters came to Rhode Island to save money. When Rhode Island jacked its tax up this year, the added business was erased, he said.

"I've lost about 40 percent of my business," said Eid. "We are barely making our payments."

In April, the Rhode Island General Assembly approved a $1 increase on the state's excise tax, increasing the tax on cigarettes to the highest in the nation, at $3.46 a pack. The increase, combined with a federal cigarette tax increase to $1.01, and a 7 percent additional sales tax on the $3.46 excise tax, meant a record price of $8.35 a pack for most name brands here.

The increase pushed Rhode Island's cigarette tax to nearly $1 more than neighboring Massachusetts, creating a huge competitive disadvantage for convenience store owners here, with adjoining Massachusetts municipalities like Seekonk and South Attleboro just a short jaunt up the road for most area smokers.

The decrease in cigarette smoker traffic also means that patrons are no longer coming in to purchase lottery tickets, drinks, snacks, and other items typically purchased along with a pack or two of cigarettes.

Eid, who has started Habanos Cigar Lounge to replace a second convenience store on Newport Avenue, said he and other Pawtucket convenience store owners went to the Rhode Island State House to protest the state's tax hike earlier this year, but to no avail.

"We went but they didn't listen," said Eid. "When (legislators) decide to do something they just do it."

Steven Biron, a Burrillville convenience store owner who serves as a member of the New England Convenience Store Legislative Committee told The Breeze that state tax figures for July and August revealed that added anticipated revenue from cigarette sales in Rhode Island came up short by about $3 million, totaling $23.5 million in new revenue compared with projections of $26.3 million.

Paul Dion, who heads up the state's Office of Revenue Analysis, confirmed that cigarette sales during the two summer months were down 19.9 percent, leaving the state $2.8 million short of the revenue he and others had expected, but that estimated revenue for a whole year cannot be determined based on such a short window of time.

"You can't really extrapolate what will happen going forward from only two months of reporting," said Dion. "You need a little more time before you can really determine a trend."

The Campaign for Tobacco Free Kids has touted the increase in cigarette taxes in Rhode Island as "a health win that reduces smoking and saves lives; a financial win that raises revenue and reduces health care costs; and a political win that is popular with the public."

But Eid and others say the tax hike is no win for either them or their customers. Rhode Island businesses that supply everything from coffee to candy bars at convenience stores are also hurt, he said, as lessened demand from customers funnels all the way down to them.