Store owners fear cigarette tax increase

CONCORD - Owners of grocery, convenience and retail distributor stores lobbied state senators Monday to cut - if not eliminate - a proposed increase in the cigarette tax.

The House-approved $10.4 billion, two-year state budget plan relies heavily upon this tax, increasing it from 80 cents to $1.25 per pack.

Gov. John Lynch had proposed the tax only be raised to $1.08 to finance his budget plan.

John Dumais, president and chief executive officer of the New Hampshire Grocers Association, claimed his lobbying organization lost five small businesses that went under after the Legislature last raised the tax July 1, 2005.

Even though the state took in more money from the higher tax, it sold six million fewer packs of cigarettes in 2006 compared to 2005, he explained.

"We aren't talking about any small consequences for the state," he said.

The grocer lobby claims that for every $1 in cigarette pack sales, the state receives another $3.40 in other purchases.

Studies have concluded 40 percent of cigarette sales come from out-of-state residents. Massachusetts' residents make up the largest portion of that group.

Massachusetts Gov. Deval Patrick has said he would oppose any increase in that state's tobacco tax, which is $1.51 per pack but doesn't include 20 cents that comes from applying the state's 5 percent sales tax.

"Massachusetts sold more packs in 2006 and profited from our last increase so you can bet they are hoping to do even better if we make the same mistake again," Dumais warned.

Supporters insist the state's retail sector would still profit from cigarettes sold at the higher price and that it would discourage teens from starting the addictive habit.

Ray Tetu said the higher tax would force his business to post a larger bond to cover the payment of tax stamps onto all cigarettes sold from his Manchester Wholesale Distributors Inc.

The firm employs 65 and has been in the family since 1939, but Tetu claims this latest proposed increase may put him under.

"If MWD and the other independent distributor within the state of New Hampshire were to close its doors tomorrow, there would not even be a hiccup for a split second for cigarette supplies," Tetu said.

Manchester Democratic Sen. Lou D'Allesandro, who is chairman of the Senate panel writing the budget, said it's too early to know how much of a tax increase is needed.

The finance panel is spending all of this week making final decisions about spending priorities for its version of the 1,100-page budget bill.

John Ganos, owner of the State Line Store on Route 13 in Brookline, said he attracts out-of-state purchases by advertising in daily newspapers as far removed as Worcester, Mass.

"Is this tax increase a good bet for the state? I know it is not for my business," Ganos added in a written statement. "And when the state is finished taxing this source into oblivion, where will they turn next?"