Tennessee smokers will begin paying more for cigarettes on July 1 under a bill signed into law last week by Gov. Bill Haslam, reports the Times-Free Press.
The 15 cents-per-pack increase is the first of three that will total 35 cents by July 1, 2017.
The change is technically not a tax hike. What lawmakers have done is increase the minimum price mark-up over retailers’ “cost of doing business” for buying and selling a 20-cigarette pack.
The minimum now is 8 percent, or 41 cents per pack. That minimum will rise in three steps to 15 percent, or 76 cents per pack, over two years, according to a legislative fiscal analysis.
It’s an 85 percent increase in the minimum mark-up and its expected to sweeten retailers’ bottom lines by $129.22 million in year three, according to the analysis by the General Assembly’s Fiscal Review Committee. (Note: It’s HB225, sponsored by Rep. Pat Marsh, R-Shelbyville, and Sen. Rusty Crowe, R-Shelbyville.)
This is the first change in 65 years to Tennessee’s Unfair Cigarette Sales Law. Twenty-five states have such laws, passed largely in the 1940s to 1960s in the name of protecting smaller retailers from unfair competition by chains and large discount stores.
In this case, convenience and grocery stores, including chains, lobbied for the increase, saying major tobacco manufacturers were pressuring them to keep prices at or near the minimum mark-up.
But retailers weren’t alone in supporting the bill. Children’s health advocacy groups joined in, among them the Children’s Hospital Alliance of Tennessee, the March of Dimes and the Tennessee Chapter of the American Academy for Pediatrics. Research shows any hike in cigarette prices will spur smokers, especially kids, to kick the habit.
The average price of a pack is $5. The fiscal analysis estimates the change will decrease cigarette sales by 2.24 percent.
Emily LeRoy, executive director of the Tennessee Fuel & Convenience Store Association, said the increase is “good health legislation and it’s good for retailers.”
She said pressure from tobacco manufacturers to keep prices low meant convenience stores were making little to no money on a product that on average accounts for 20 percent of sales.
…The governor and his family hold major stakes in Pilot Flying J, the largest operator of travel centers and travel plazas in North America. Haslam’s older brother, James “Jimmy” Haslam III, is the privately held firm’s CEO.
And Pilot Flying J does sell cigarettes and is a member of the Tennessee Fuel & Convenience Store Association.
Asked about Haslam, LeRoy said, “I will tell you this, we try to be very cognizant of that impression. So we did not directly lobby the governor on this bill.”
David Smith, a Haslam spokesman, said the governor’s ties to Pilot Flying J “had no bearing on his decision to sign the bill.”