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Vermont Selling A Lot More Than Cheese



July 15, 2010

New Yorkers are flocking to Vermont. But apparently residents of the Empire State are not driving all the way over to the Green Mountain State for just some maple syrup, cheese, or Ben & Jerry's ice cream. Instead, New Yorkers are driving many miles, crossing rivers and Lake Champlain, in order to buy what will probably become Vermont's latest product of renown, cigarettes.

The Burlington Free Press reports that convenience stores along the New York-Vermont border have noticed a significant increase in cigarette sales within the past two weeks. At the West Addison General Store, owner Dana Franklin has noticed a real increase in his cigarette sales. What's behind the increase in sales? According to Franklin, the cause is higher tobacco taxes in New York.

On July 1, New York increased its tobacco tax rate by $1.60 to $4.35 per pack, the highest cigarette tax rate in the nation. The tax increase had the effect of raising the price of a pack of smokes to about $10 in Upstate New York; in New York City, which levies its own high tobacco tax rates, cigarettes now cost about $12 per pack. As the Free Press story illustrates, the increase in the cost of cigarettes is sending people over state lines to jurisdictions with lower taxes in search of cigarettes that cost less. In Vermont, the cigarette tax is only $2.24 per pack. Under these current rates, a New Yorker who buys a carton in Plattsburgh, NY will pay $43.50 in taxes for just one carton of cigarettes but will only pay $22.40 in taxes if he rides the ferry across the lake and buys that one carton at the West Addison General Store in Vermont. With a difference of $21 in just taxes, no wonder Franklin is selling more cigarettes. He'll likely been selling more smokes for the foreseeable future. One New Yorker is quoted as saying, "It's absolutely insane. I'm going to keep buying my cigarettes on [the Vermont] side of the lake."

New York officials said that they had to raise tobacco taxes in order to help "keep the state running". But if New Yorkers are going places like Vermont to buy their cigarettes, then the revenues from the excise tax and the consumer activity will remain in Vermont.  As the Free Press reports: "Convenience stores in border towns reap more than just the benefits of increased cigarette sales when New York raises tobacco taxes. [West Addison's] Franklin said people who cross the border into Vermont to buy cigarettes generally buy other items, too. West Addison General Store has a deli, makes pizza, and sells beer, gas, lottery tickets, maple syrup and T-shirts, among other items."

The politicians in Albany can't say we didn't warn them about the problems with tobacco tax hikes, including the fact that they don't raise promised revenues and drive commerce out of the state. Let's hope that, in the months ahead, politicians will learn from this experience and realize that higher taxes are not the answer to New York's budget woes. In the meantime, if anyone in Upstate New York is visiting the West Addison General Store, can you pick me up a pint of New York Super Fudge Chunk?


 

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