Sunday, June 30, 2002

Cost of smokes goes up in Ohio

Come Monday, expect to pay extra 40 cents

By Nathan Leaf
Enquirer Columbus Bureau

        COLUMBUS — Ohio smokers will pay even more than they expected for cigarettes once a new tobacco tax takes effect Monday. In addition to a 31-cent per pack tax increase, consumers will also be hit with at least another 7 cents in tacked-on minimum mark-ups that will go to tobacco wholesalers and retailers.

        Ohio lawmakers raised the cigarette tax from 24 cents to 55 cents in May to help erase a $1.9 billion budget deficit.

        Less publicized was their approval of a plan that raises tobacco wholesalers' minimum allowed mark-up of cigarette prices from 2.5 percent to 3.5 percent. Retailers' mark-ups will increase from 6 percent to 8 percent.

        That will put the average total increase for a pack of cigarettes at 40 cents. Industry experts say prices will vary for generic and premium brands.

        The cost of a generic brand such as GPC or Pall Mall should go from $2.05 to $2.44. Premium brands such as Marlboro or Kool should rise from $3.26 to $3.69 per pack, said Beth Wymer director of the Ohio Wholesale Marketers Association, which includes tobacco wholesalers.

        Wholesalers and retailers call the mark-ups a token gesture to cushion financial losses they expect to suffer when smokers opt to buy their cigarettes in other states or simply quit because of the higher prices.

        The mark-ups would soften the blow, said Gerard Dehrmann, a lobbyist for the Ohio Grocers Association.

        Jeff Lykin, owner of several Friend's and Clark gas stations in Greater Cincinnati, said the mark-up is small consolation. He estimates $600,000 in lost cigarette sales in Ohio to competing stores in Kentucky, where the tax is only 3 cents per pack.

        “I'm going to give up some sales, and I'm going to get back a penny per pack?” Mr. Lykin said. “It's not going to fill the hole.”

        Gary Gudmundson, spokesman for the Ohio Department of Taxation, said the higher tax should bring in $283 million to the state's general revenue fund in the fiscal year that starts Monday.

        Lawmakers focused on cigarette taxes as a way to not only balance the budget but, they said, to deter smoking and thus reduce the state's smoking-related health care costs.

        Chris Schulte, a spokeswoman for Tobacco-Free Ohio, said the 31-cent increase should stop an estimated 50,000 teenagers from taking up smoking. Her group wanted lawmakers to raise taxes 50 cents per pack.

        Gov. Bob Taft and Senate Republicans supported a 50-cent tax hike, but that plan fell apart in the House after conservative Republicans objected.

        “Obviously, we would have liked to see the 50-cent increase, but we still appreciate the legislature's 31-cent increase,” said Ms. Schulte. “It will still prevent some youth from picking up the habit.”

        Jeff Kathman, owner of Cut-Rate Tobacco, a company that operates five stores in Cincinnati, says state officials should have looked elsewhere for their money.

        “I think it is terrible to punish half of society to solve the budget problem,” Mr. Kathman said. “It's a cop-out.”


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