Increasing excise tax on cigarettes would harm convenience stores

 

 

The economic recovery has been disappointingly slow for some. Few industries, if any, have been spared from the sluggish growth, hiring freezes, layoffs, and declining revenues that have been all too common over the past five years. However, lately, many businesses, both big and small, have seen their fortunes reverse as the economy appears to be turning around.

 

AS A MEMBER of the Georgia Association of Convenience Stores, I am keenly aware of the struggles that have faced businesses in our state since the onset of the recession. GACS represents more than 2,500 Georgia small businesses that provide jobs and affordable goods to the communities they serve. Convenience stores in Georgia have created more than 2,000 jobs between 2010 and 2012, and we need to ensure that there are no legislative or regulatory obstacles that could jeopardize continued job creation.

In spite of the difficulties we have faced and the progress we have made, we have learned that President Obama has proposed a 94-cent increase in the federal excise tax levied on cigarettes. If enacted, this tax increase would fund the $75 billion federally funded portion of a state-federal program that would expand access to early education.

We are highly supportive of state and federal measures that seek to improve education, but they should not be implemented
at the expense of jobs and economic activity. Choosing to fund the program with a tobacco tax increase could have negative implications for GACS members and conveniences stores across the nation.

Our member stores sell a variety of products, but tobacco products are undoubtedly one of their most important sources of revenue. According to the National Association of Convenience Stores, in-store sales of cigarettes account for nearly 40 percent of convenience store revenue nationwide. Any increase in the federal excise tax on tobacco products could cause a corresponding increase in black-market activity where tobacco products are cheaper because the appropriate taxes are lower or not collected at all.

 

THIS IS PROBLEMATIC because our members could lose the revenue they would have collected from not only from the sales of tobacco products, but also from the sales of the non-tobacco items – such as gas, coffee, or food items – that usually accompany these purchases. Cigarette tax increases could benefit illegal and counterfeit cigarette sellers while harming law-abiding retailers such as the ones GACS represents.

Our members are justified in their concern. In 2009, the federal excise tax on cigarettes increased from 39 cents to $1.01, and tax-paid sales of cigarettes declined by more than 8 percent. This is compared to an average decline of 3.8 percent per year over the previous 10 years. There are more than 66,000 individuals who work in the convenience-store industry in Georgia, plus thousands of
additional jobs provided by the direct suppliers to the same industry.

Convenience stores, like most retailers of consumer goods, sell products at very low margins. They are heavily dependent on sales volume to maintain their businesses and employment levels. As previously explained, a cigarette tax increase could diminish sales in multiple convenience store product categories. This decrease in revenue could cause convenience stores to cut employee hours or even lay them off.

 

AMID SO MUCH economic uncertainty, our leaders in Washington, D.C., should be careful to consider the consequences their decisions could have on small businesses and job creation. I encourage members of Congress, the Georgia delegation in particular, to work with President Obama to find a better way to fund this well-intentioned program – one that will not undo the hard-fought economic progress we have made.

 

(The writer is president of the Georgia Association of Convenience Stores.)

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