By Marc Schollett
Monday, March 23, 2009 at 12:09 p.m.
Read more: Local, Fact, Finder, Marc, Schollett, Smoking, Tax, Tobacco, Fact Finder
Imagine if something you used several times each and every day suddenly cost you four times the amount.
For tobacco users here in Michigan, it doesn't take much imagination to know how that feels.
They are seeing an unprecedented rise in the cost of their supplies and are wondering why.
The answers I found for them are the subject of this fact finder.
As it turns out, there are only two types of tobacco users: Those who are suddenly paying a lot more for their habit; and those who will soon be paying a lot more. Ask any smoker, in the past 10 days, chances are they have paid at least $6.10 more for each carton.
Shawn Gray, Director of Operations with Blarney Castle says the cost is big, and the impact will be widely felt, "23% of the population still smokes. That's a huge portion of our business. Basically that's money out of their pockets."
Out of their pockets and headed to Washington. Why? The Federal Excise Tax has been raised to fund health insurance programs for low income children. A lot of people like the program but most smokers don't think its fair they're paying for it. Gray says "I think they are looking at one segment of the population and trying to get most of the money out of that segment to finance something. I don't think that's fair."
And it doesn't end there...enter OTP, other tobacco products, like loose tobacco, chewing tobacco, and small cigars. Gray says "we are going to see a bigger hit with otp here at the end of the month, that's going to go up over 2000% at the end of the month plus additional monies in October."
A 2000% jump in the tax rate for some otp's like loose tobacco which happens to be very popular here in Michigan. Smokers looking to save some money and avoid paying Michigan's 2 dollar per carton state tax buy papers and loose tobacco and make their own cigarettes....but with the 2000% tax jump.
I asked Mr.. Gray "Does that become less of a bargain? Do you have any real numbers?" He replied "....a 1 pound bag of tobacco will make 2 to 2 and 1/5 cartons of cigarette so it is a good value for the customer that bag of tobacco is about $19.50 at the end of the month, on April 1st the same 1 pound bag is going to retail for around $72."
That's why smokers are stocking up now, before April 1st, when the federal tax rate goes up. But October could just as painful for Michigan tobacco users. Governor Granholm has called for an increase at the state level that could have prices soaring once again. Gray confirms "they are looking at doubling the otp tax and that is a huge part of our business along with our competitors."
Many tobacco users say the federal increase is bad enough, why does the Governor propose adding more taxes?
I contacted the Governor's office asking her that very question. Her office forwarded my request to the Michigan Department of Treasury who says OTP taxes had to be raised to be closer to the current cigarette tax because:
"This significant tax differential has created an incentive for consumers to substitute tobacco products taxed as OTP for cigarettes."
Terry Stanton
Public Information Officer
Michigan Department of Treasury
So what do you think? Are tobacco users being unfairly singled out? What else would you like to see taxed? Or is this just policy fair in your books?
Let me know what you think.