WASHINGTON – Both the House and Senate are considering legislative proposals to raise the federal excise tax on cigarettes by 61 cents per pack, making the federal tax an even $1 per pack. Proponents of the proposed hike are using the increase as a way to expand the State Children's Health Insurance Program (S-CHIP).

NACS is opposed to an increase in the federal excise tax on cigarettes for two main reasons. First, the proposed increase in the excise tax on cigarettes is likely to increase tax evasion. Cigarettes are one of the highest taxed products in the U.S. economy. Federal, state and sometimes local taxes on cigarettes constitute a highly significant portion of the price charged to consumers when they purchase this product. These ever-increasing prices have induced many consumers to seek illegal "untaxed" sources for tobacco products.

Second, an increase in the federal excise tax on cigarettes is likely to increase crime at retail outlets. Over the last two decades, the price of a pack of cigarettes has increased dramatically as a result of higher state excise taxes. (See the article "Up, Up and Away" in the May 2007 NACS Magazine.) Consequently, retailers of cigarettes have experienced an increase in robbery incidents in which criminals' primary objectives have been to steal not cash, but cigarettes. Most tobacco retailers exercise strict control over how much cash is available in the event of a robbery. As a result, stealing cigarettes gives the criminals a higher return on their efforts than cash.

Several tobacco suppliers have informed NACS that they developed point-of-sale displays that oppose the proposed increase and will make them available to retailers in select states and congressional districts through their respective sales forces. These displays are to encourage consumers to contact their senators and representatives to oppose the excise tax increase.

NACS is working with the major manufacturers and distributors to oppose the increase, and is encouraging NACS members to visit the following grassroots websites set up to assist retailers and consumers with contacting members of Congress to share their opposition:  www.stopthefetincrease.com, www.nocigtax.com, and a toll-free phone number, (877) 857-8074.