June 15, 1998
Guest Column
McCain tobacco bill threatens more than just retailers
Curt Wright
Congress is now considering a grossly unfair and poorly conceived piece of tobacco legislation (the McCain bill) that, if it becomes law, would be a devastating blow to convenience stores and other retailers around the state.
It also would impose the largest tax increase ever levied against a legal product.
Our company's philosophy and policy is to be a responsible tobacco retailer.
We support initiatives like the "We Card" program and train our employees to check I.D. before selling tobacco. In fact, we instituted our training program years before tobacco became a politically incorrect product.
The willingness of some politicians and Washington bureaucrats to jeopardize millions of jobs just to further their own political careers is a major threat to our country.
The McCain bill is so punitive and imposes so many financial penalties that it could severely damage the livelihoods of tobacco wholesalers, retailers and their employees.
At present, the sale of tobacco products accounts for nearly 30 percent of gross revenue in many smaller retail outlets.
However, the bill would force adult Americans who choose to smoke to pay more than a half-trillion dollars in tax increases by raising the price of cigarettes to about $5 per pack ($50 per carton) within five years.
At prices like that, analysts predict cigarette volume could fall off by as much as 46 percent. And with those lost cigarette sales would go sales of groceries, beverages and other add-on items that smokers purchase when they go into a store to buy cigarettes.
With such a major loss of revenue, layoffs are almost certain.
These unreasonably harsh tobacco taxes also can be expected to create a thriving black market in cigarettes, providing a windfall to organized crime.
Our stores will lose those sales, and the government will lose tax revenues.
Cigarettes are considerably cheaper in Mexico, so once the government forces the price of cigarettes to $5 per pack, smuggling will suddenly become a growth industry.
Want proof? Just look at the gray market that is already thriving right here in Kansas. Stores located on Indian reservations legally and aggressively advertise their ability to sell cigarettes tax-free.
In fact, the Omaha tribe advertises that it sells cigarettes for 80 cents per pack. It creates an environment ripe for someone to legally buy cigarettes from the tribal stores then illegally re-sell them for a profit at a price that is still lower than our stores can charge.
You also can look at the Internet where children are using their parents' credit cards to order cigarettes -- lying about their age and their identity because they know it's against the law for them to purchase tobacco.
It is especially ironic that the bill purports to have as its primary goal a reduction in underage smoking.
But, because it creates a huge black market, the government will not be able to regulate black market sales to minors. You can bet that smugglers won't ask for age verification.
A final question is, after tobacco, what's next?
Those who think they know what's best for others are equally interested in banning an entire range of products including alcohol, caffeine and high-fat snack foods, and since the groundwork for eliminating these items already would be in place with the successful prohibition of tobacco, the process would be easy.
And once again, we would be forced to remove these prohibited items from our shelves, while praying for the survival of our business.
The consequences of the McCain bill are very real and foreseeable. Like it or not, cigarettes are a legal product. It is not fair to jeopardize jobs and put legitimate businesses at risk just because some members of Congress and some activist groups do not approve of smoking.
With a massive loss in jobs and the creation of a black market, the bill's hazardous ripple effects will make no one a winner except the criminals.
Curt Wright is vice president of operations for Taylor Oil Inc., which has convenience stores in Spring Hill, Gardner, Ottawa, Lyndon and Harrisonville.
© 1998, Kansas City Business Journal
