LANSING – Michigan convenience stores each would each lose $1,316 in profits if the state increased the cigarette tax by 25 cents per pack, according to a study released Tuesday.
The study, commissioned by the Michigan Petroleum Association and Michigan Association of Convenience Stores, warns that a cigarette tax increase to help patch the state’s budget would negatively affect businesses that sell cigarettes, especially those near Indiana, Ohio and Wisconsin, where the cigarette tax is less than Michigan’s.
No one has publicly proposed raising the $2-per-pack cigarette tax to address the state’s $2.7 million deficit. But officials indicated Gov. Jennifer Granholm did offer proposals in a closed-door meeting with legislative leaders to raise revenue.
Although Granholm has declined to say what she proposed, there is still concern that the state could once again turn to the cigarette tax to raise revenue, said Mark Griffin, the petroleum association president. The tax was last raised in 2004.
“I don’t think in today’s day and age we can take even the smallest rumor or proposal and think it’s not going to happen,” Griffin said at a roundtable with reporters.
The study was conducted by Donald Alexander and William Kern, Western Michigan University economics professors, and William Keip, president of Keip Government Solutions, an economic consulting firm.
Gas stations basically break even on gasoline sales and make their profit on what they sell in their stores: pop, candy and cigarettes, Griffin said. The study said the total profit loss to convenience stores would be $6.4 million.
“It’s simply not a loss we can afford to take,” Griffin said.
Jim Holcomb of the Michigan Chamber of Commerce called a cigarette tax hike a “job killer,” and said raising the levy now would only add to the economic difficulty facing state businesses.
Michigan has the sixth-largest cigarette tax in the nation with New York state Number 1 at $2.75 per pack. New Jersey is second at $2.575. With Indiana at $0.995, Ohio at $1.25 and Wisconsin at $1.77, “the smokers in Michigan have options,” Keip said.
The three researchers also said Michigan is in danger of raising its cigarette tax to the point where the revenues it produces fall because smokers turn to smuggled in increasingly large numbers.
While the cigarette tax has been raised multiple times this decade, doing so could be more difficult this time. Senate Majority Leader Mike Bishop (R-Rochester) has said he dislikes the idea.
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