Smoking, chewing gets more expensive

HELENA - The price of lighting up has gone up, with a cigarette tax increase taking effect today as part of the Legislature's effort to balance the state budget.

The tax jumped 52 cents a pack, from 18 cents to 70 cents, at midnight. That was just seven hours after Gov. Judy Martz signed the major tax measure of the legislative session. It included increases on cigarettes and other tobacco products.

Janet Barnhart of Billings said Wednesday she was angered by lawmakers' decision to raise a tax aimed at a small portion of the population.

''Just because I choose to smoke, I don't feel that I should be punished for it,'' she said. ''I feel that they're targeting me as a smoker.

''If they're going to raise taxes, they should raise them on something that everybody uses,'' said Barnhart, who expects the price increase will prompt her to cut back on smoking by a carton a month.

The higher taxes on smokers and chewers were contained in Senate Bill 407, which also raised the motel room tax from 4 percent to 7 percent and created a 4 percent tax on car rentals. The higher room tax takes effect June 1 and the rental tax begins July 1.

The tax on chewing tobacco will be 35 cents per ounce and the tax rate on such things as pipe tobacco and cigars will double to 25 percent.

The changes are expected to raise $86.5 million over the next 26 months. About $71.5 million will be used to balance the budget and the remainder will offset the cost of income tax cuts.

But all that doesn't mean much to those on the front lines in the cigarette market.

''It's unfortunate they singled out 20 percent of the population to balance their budget,'' said Kathy Allen, co-owner of a chain of six Cigarette Stores of Montana outlets in Billings. ''It's just a stopgap measure. They will find as taxes go up sales go down.''

She said her customers have been stocking up with cheaper cigarettes before the increase arrived. ''The last two days have been barn-burner days.''

Ronna Christman, lobbyist for an organization of convenience stores, said her members are concerned that the higher price will spur bootlegging of cigarettes from other states and greater Internet sales.

''We expected a tax increase and said we would not oppose one that is unreasonable,'' she said. ''This is unreasonable. We asked them to keep it (the total tax) under 50 cents. That would have kept us more competitive regionally.''

Cigarettes are a big part of a typical convenience store's business, accounting for 35 percent of sales and second only to gasoline, Christman said.

Joe Calnan, owner of the Montana City Store south of Helena, was angry the tax increase takes effect just six days after the Legislature passed the bill. Store owners were scrambling to inventory and re-price their cigarettes and tobacco products in time for the change, he said.

Calnan predicted the higher price will dampen sales. ''It will cut out people on the margin who think cigarettes are too expensive but stick with the habit. It will drive them out of the market.''

Lower sales also may prompt independent stores such as his to drop cigarettes altogether, he said.

Mark Rainey, retail manager for the convenience chain of 28 Noon Stores, said many customers come in primarily to buy cigarettes and a decline in sales of that item will be accompanied by a drop in sales of other merchandise as well, he said.

Cigarettes account for as much as half the stores' business and the outlets each have 3,000 to 4,000 packs in their inventory, Rainey said. That made it difficult to accurately count the stock and adjust prices by today, he said.

Allen said the price increase - a minimum of $6.05 per carton when the mandatory markup is added - will cause sales to slump for a few weeks, but then rebound to a level lower than now.

''Some people will successfully quit smoking over this price, but in the long term, it will not solve the budget problems in Helena,'' she said.