Merchants puzzled as legislators debate

Not even a smoker knows how much a pack of cigarettes truly costs in Rhode Island.

As the House and Senate continue to debate a proposed increase to the state’s $1 cigarette tax that was supposed to take effect May 1, wholesalers, distributors and retailers are finding themselves in limbo, debating whether to hike prices.

Richard Buckett, owner of Buckett’s General Store in East Providence, tried to hold out, but that changed when his cigarette supplier raised prices.

PBN Branded Content

Seifert Systems Invests in Energy Efficiency to Strengthen Operations

For manufacturers, energy is more than just another operating expense. It plays a critical role…

Learn More

"I waited until I picked up my last order and I was charged 36 cents a pack," he said. "I can’t afford not to raise prices. I am concerned what will happen when the law does go into effect."

Rhode Island lawmakers, like those in other states, are looking at the proposed increases – currently 35 cents in the Senate and 27 cents in the House – as a way to offset the state’s projected $70 million deficit this year.

In all, 29 states have considered or have already imposed cigarette tax increases to plug budget gaps that total $27 billion this fiscal year, according to the National Conference of State Legislators. Legislators in Massachusetts recently approved a bill to raise their tax on cigarettes by 75 cents to $1.51 a pack – making them the most expensive in the nation, followed by New York and Rhode Island.

But while Rhode Island officially might not have passed its own increase yet, consumers are feeling the effects already. That’s because wholesalers, distributors and retailers, afraid that they won’t be able to afford the new increase, which is expected to be retroactive to May 1, have already begun to raise their prices.

"There is no law in the state of Rhode Island that says how much people can charge for a pack of cigarettes," said Charles Horsfall, a tax investigator with the state’s Division of Taxation. "When this increase does go into effect, it will be effective as of May 1, so these vendors could suffer a great loss by virtue of the inventory they have now. Only the foolhardy wouldn’t raise prices in a time like now."

But no one seems to know when that will happen. According to vendors, they have been told only that the increase is inevitable.

"I just don’t understand it," said Jeff Myllymaki, who works at Rippy’s Liquor Store in Charlestown. "How can you charge someone without passing the bill first? I question the whole legality of it."

According to Horsfall, it’s legal because the state isn’t charging the increase yet – the distributors and wholesalers are.

"Because these people know that when the law is passed it will be retroactive to May 1, they are preparing," he said. "All of these vendors and distributors have done inventories under the order of the state. No matter when the bill itself passes, it will go back to May. That has already passed."

In the meantime all vendors can do is wait.

"There is nothing that we can do; we are at the hands of state government," Buckett said. "It’s just frustrating to listen to my customers complain."

And complain they have. In the last few years, cigarette prices have increased "two to three times a year," Myllymaki said.

"Between state and federal taxes, and increases from the manufacturer it’s unbelievable," he said. "I am not a fan of smoking, but is it right to target one segment of the population? These increases aren’t targeting the rich; they don’t smoke."

Iris Lav, an analyst for the Washington-based Center on Budget and Policy Priorities, a group that lobbies for the low-income workers, agreed that increases like Rhode Island’s and others across the country target those least able to pay. According to the Center for Disease Control and Prevention, about 33 percent of adults with income below the poverty lines are smokers.

It’s not just individuals that are impacted. Cigarettes "are a big source of business for small grocery stores" that will bear the brunt of a these tax increases, said Edward J. McMahon, a senior fellow at the Manhattan Institute, which studies public policy issues.