Monday, October 20, 2014

Philly cigarette tax a boon for Bucks border businesses

Posted: Monday, October 20, 2014 



At the Wawa on Woodhaven Road and Route 13, business is booming — with a parking lot so packed that customers need to find spaces at a lot across the street.
Two employees ran cash registers — each with a line of at least 10 customers deep — on a recent night. And the store manager has been bringing in extra employees to handle the growing customer demand.
What’s the draw at this Bensalem store? Cigarettes, some priced at under $6 a pack. No more than a mile away in Philadelphia, the same cigarettes cost more than $8.
“We used to get between 300 and 400 cartons of cigarettes every other night. Now, we’re getting about 1,500 cartons. I would say sales have gone up from about 2,000 packs a day to between 4,000 and 4,500 packs daily,” inventory manager Jim Watson said.
That adds up at least $24,000 a day in sales, an increase of $12,000-plus since nearby Philadelphia increased its tax on a pack of cigarettes by $2 to help finance the city’s schools.
Other stores along the Bensalem-Philadelphia border also report that cigarette sales are up since the new Philly tax took effect Oct. 1.
At Ace News and Tobacco in the 1100 block of Bristol Pike, near the Philly border, a man who identified himself as the manager attributed his recent customer spike to Philly’s increased cigarette tax.
“Every day, customers come in from Philadelphia,” said the manager, who declined to give his name.
In a statement, a Wawa spokeswoman said the corporation doesn’t share store-specific sales data, but added that the boom in suburban sales is no surprise.
“We can say that we expected to see an initial bump in tobacco sales in our Philadelphia County border stores,” the spokeswoman said. “This would mirror sales patterns we have seen in the past, in stores that border a state where tobacco excise taxes have been raised, as consumers shift their shopping patterns looking for value.”
A 7-Eleven spokeswoman declined comment on changes in sales between Philly versus its suburbs since the tax took effect.
Philadelphia has one of the highest rates of adult smokers in the USA, with an estimated 23 percent of residents who light up, according to a 2014 Community Health Assessment study. An average of 18 percent of USA adults smoke, according to the Centers for Disease Control and Prevention.
The number of smokers in Philly, though, is expected to drop because of the tax, according to the Philadelphia Department of Public Health. The agency, which led the city’s analysis of the cigarette tax impact, estimates a 5 percent decrease for each year after the first year of the tax. Additionally, the city analysis assumed 30 percent of smokers would avoid the increase by seeking cigarettes on the black market or in outside counties such as Bucks.
Based on those two factors alone, Philadelphia estimates per-pack sales of cigarettes will drop from 65.1 million to 41.6 million in the first year of the tax, according to published reports. Still, the city government anticipates the new tax will generate $49 million in its first year, which will help shore up an $81 million gap in the Philly school district’s budget.
Cigarette taxes undoubtedly bring in new revenue, according to the Campaign for Tobacco Free Kids.
“Philadelphia is going to see a big increase in revenue and a big decrease in tobacco use,” said the organization’s spokesman, Peter Fisher, adding that revenue losses will be offset by savings in health care costs over time.
A Campaign for Tobacco Free Kids report released last year found that every state that increased cigarette taxes received a bump in revenue they otherwise wouldn’t have collected, despite a drop in sales related to people quitting or buying cigarettes in other towns or online.
“The higher level of state tobacco tax revenues after a rate increase will decline over time as state smoking levels continue to shrink, but the revenue levels will remain much higher than they would have been without the rate increase,” the report said, adding that the revenue decline occurs at a “gradual, predictable” rate, which makes related budget planning “quite easy.”
But a 2010 National Conference of State Legislatures study found cigarette taxes aren’t a stable revenue source because, unlike other excise taxes, they’re levied on a per-unit basis that doesn’t automatically provide revenue growth in response to price increases.
The study also found a drop in per-capita cigarette consumption since 1970 and the failure of tax rates to keep pace with inflation had led to a significant drop in state revenues from to cigarette taxes. And it noted that cigarette taxes can lead to other economic losses when customers cross state or city lines to buy cigarettes — and other goods as well.
Local smokers say the longer waits at register lines in stores along the Philadelphia border are no surprise.
“I knew that was exactly what was going to happen when they said $2,” said Amber Dixon. She lives in Northeast Philadelphia, but has family in Bucks County.
She said she now makes the short trip twice a week to Bensalem or Bristol Township to buy her smokes.
“It’s ridiculous. A couple cents is no big deal, but a couple dollars is a big leap,” Dixon said.
To avoid the long lines, she makes cigarette runs in the morning when the stores are less busy. She recalled one recent trip when a cashier told the guy in front of her the store was out of the cigarette brand he wanted. So far, Dixon said she hasn’t seen any stores she patronizes run out of cigarettes — “not yet anyway.”
At the Woodhaven Road Wawa, a Philadelphia woman who didn’t want to give her name, bought two packs of Marlboro Menthol Lights at $5.98 a pack — $3.10 cheaper than a mile or so away.
“Yes, I came here to save money,” she said. “It only makes sense.”
Middletown defense attorney Niels Eriksen is a smoker. He says he hasn’t noticed longer lines in Bucks County stores.
“I will never buy cigarettes in Philly, but I live in Bucks County and never really need to,” he said.
Eriksen said he supports taxing cigarettes, but believes Philly went too far.
“The Legislature should have made it (the tax) statewide for 25 cents a pack, instead of $2 in Philly,” he added. “It is easily evaded by going out of county, difficult to enforce purchases for Philly residents, and punishes the poor and those without means to get out of county to buy cheaper cigarettes.”
Jo Ciavaglia: 215-949-4181; email: jciavaglia@calkins.com; Twitter: @jociavaglia

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