Editor’s note: This op-ed is by Dana Franklin, owner of West Addison General Store.
As the owner of the West Addison General Store, which is a border store to New York in the town of Addison, we wish to give you our thoughts concerning the proposed $1 per pack increase or any increase on the current tobacco tax. First off let me start by saying that we understand the harmful effects of tobacco, we do not advertise tobacco products other than inside our store. We believe education is the key to keep people from starting or helping them to quit. That said, let us look at tobacco simply as a legal product sold in our state, no different than alcohol.
Can we afford, especially in this economy, to do anything that will drive commerce out of this state? Shouldn’t we be doing whatever we can to make people want to come here even more?
I would like you to consider our store as a case study. When Lorraine and I purchased our store in 1989 we were selling approximately 20 to 30 cartons of tobacco per week. There wasn’t a huge difference in tobacco tax between New York and Vermont. We had a little growth over the next 10 years but nothing significant. From the years 2000 through 2005 New York had one of the highest taxes on tobacco in the nation. Vermont had a large advantage for our tobacco tax was much lower. A tobacco customer could save between $10 to $15 per carton by shopping in Vermont. Because Vermont has a lower gas tax than New York, people (especially commuters) buy their gas here also. During the peak of this tax differential we were selling between 800 to 1,000 cartons of tobacco per week. The cigarette tax and sales tax generated by these additional sales was significant. I know many of my customers from New York personally, and I know that they would come to Vermont, buy their tobacco and gas from me, travel to Vergennes and do some shopping and then stop and get some lunch before they went back to New York.
In 2006, Vermont caught up with New York on taxing tobacco. Our sales started to drop when we became at par with New York and even dropped more for the period of time that New York was cheaper than Vermont. We dropped to under 100 cartons per week from 800. I want to point out that this was not due to people stopping smoking because if it was I wouldn’t be writing this letter, it was from people buying over the Internet, going to the Indian reservations, or just buying in their home state. Since they were not coming to our store for tobacco, they were also not coming for gas, other shopping and lunch.
Last year, New York went up again and now has the highest tax in the country (Vermont is 9th) and our sales have begun to climb again. Adding any additional tax to tobacco will make us lose any ground that we may have gained.
My question to you (my legislators) is this. Can we afford, especially in this economy, to do anything that will drive commerce out of this state? Shouldn’t we be doing whatever we can to make people want to come here even more? It’s hard to grasp the concept sometimes that lower prices/taxes create larger outcomes but as a retailer I have learned that the hard way over the years. Example: I try to keep the lowest gas price in a 20-mile radius even though I don’t have a lot of other stations to compete with within a 6 mile radius. Once in a while I’ll lose track of what other gas stations are priced at. Within two days my sales will drop by at least 25 percent if I’m a few cents higher than my competition. This is called price sensitivity. Lost gas sales or lost tobacco sales which are low margin items result in lost in store sales which are where we make our profits.
