Published: February 13, 2007 10:58 am      

Cigarette tax hike would be harmful to small retailers

Last year, Iowa smokers paid almost $185 million in cigarette taxes, tobacco taxes and settlements to the state — that’s part of the reason there’s a $1.3 billion surplus in the state general fund.

Apparently a cool $1.3 billion in excess taxpayer money is not enough for tax-and-spend politicians like Iowa’s newly-elected governor. Fresh off a November victory, Gov. Chet Culver has seemingly forgotten a promise he made to the Iowa citizens who put him in office: “I will encourage small and family business growth; provide capital for the smallest businesses.”

Raising taxes on small businesses will accomplish precisely the opposite. Iowa’s tobacco retailers are having their feet held to the fire, as Culver recently proposed to raise the cigarette tax by a whopping $1 per pack — an increase of almost 300 percent! Moreover, he has proposed increasing the tax on cigars, pipe tobacco and smokeless tobacco by 150 percent!

However, it’s not just Iowa smokers who might face dire economic consequences.

Despite Culver’s pledge to grow small businesses, each Iowa retailer that sells tobacco products would stand to lose an estimated $20,500 in gross profits because of a cigarette and tobacco tax hike. Job loss and displacement estimates hover at almost 1,000 people in the retail industry alone.

Tobacco revenues also generate large sundry sales (items likely to be sold in conjunction with tobacco) like lottery tickets, snacks and gas — sales of which would drop, further escalating the effect on Iowa’s retailers.

When faced with tax hikes, most smokers generally do not quit smoking; they spend their money in other states where cigarettes are the cheapest.

With a $1 increase, five bordering states will offer significantly lower prices on tobacco. Consumers from states like Nebraska will no longer cross the Missouri River to buy cheaper cigarettes and gas if prices skyrocket in Iowa.

Hard-working Iowans who make a living off their retail establishments do not deserve treatment like this from their governor, especially since many of these stores are family owned and operated.

Culver may be new to his job, but he’s up to old tricks, attempting to place an undue burden on average Iowans through a tax first offered by then-Gov. Tom Vilsack.

The proposed tax-hike reeks of hypocrisy. When campaigning, Culver claimed he cared deeply about business. He promised to be a leader who would keep Iowa’s economy and small businesses moving in the right direction. Yet, after only two weeks in office, with his administration enjoying an enormous $1.3 billion surplus, he is already pushing a cigarette tax increase punishing small business owners. From a retailer’s point of view, enough is enough.

Iowans should urge Culver and the Legislature to consider the jobs, retailers and families that would be devastated by such a reckless tax increase and oppose any kind of a tax hike.

The hard-working citizens of Iowa deserve nothing less. For more information, visit www.dumpthetaxhike.com.