His business at The Tobacco Store has dropped sharply — a trend he blames on the long-running recession and a sharp increase in Utah’s tobacco tax. He’s already had to lay off one part-time worker and is probably going to have to cut his own salary in half.
“I might be on a slow decline of going out of business,” Gibbs said. “I’m just barely hanging on.”
Utah hiked its tobacco tax last year, raising it from 69.5 cents per pack to $1.70. For the 11 months since then, cigarette sales are down 15 percent with 9.9 million fewer packs sold, according to State Tax Commission figures, putting them on pace to drop by more than 11 million and potentially as many as 12 million packs through the end of the year.
At the same time, the revenue generated by the tax has doubled from the amount collected the year before.
Rep. Paul Ray, R-Clearfield, the sponsor of the tax hike, said the figures are “exactly what we expected.”
“You kind of get the best of both worlds. We’ve had a huge decrease in smoking, basically, and had a huge increase in revenue from the tax,” Ray said. Calls to the state-run tobacco quit line have also increased by more than 150 percent, he said.
Advocates expected that about 13,000 people would quit smoking when Utah raised its tax, but the new figures show that the equivalent of about 19,000 one-pack-a-day smokers have quit.
“Our goal was to decrease current smoking and also reduce the number of kids that take up smoking,” said Michael Siler, director of government relations for the Utah chapter of the American Cancer Society Cancer Action Network, which lobbied for the tax hike.
Even if some of those customers are going out of state to buy their cigarettes, Siler said, rough projections from the Centers for Disease Control estimate that the reduction translates into about $37 million in reduced health care costs.
“It’s happening. I really believe it’s happening,” Siler said.
David Sutton, a spokesman for Philip Morris USA, the nation’s leading cigarette manufacturer, said the trends are not so clear cut. Sutton said there is always plenty of volatility month-to-month and it takes time for the number to level out.
“Depending on how you want to look at the data, clearly there’s been a move there downwards,” said Sutton, but it’s hard to know whether people are quitting or “we suspect what it is, as it is in most states [that raise taxes] is cross-border sales.”
“It’s cross-border to the other states and it may well be Internet sales,” Sutton said.
Figures from the Utah Tax Commission show that, during the first 11 months of the 2010 fiscal year, 66.7 million stamps were sold — the stamps have to be attached to each pack, so it is the most accurate way to track sales.
For the first 11 months the new tax has been in effect, the sales have fallen to 56.8 million. The commission is still about six weeks away from having the year-end numbers.