Tobacco taxes up, sales down

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PIERRE, S.D. - A campaign to reduce smoking in South Dakota by sharply increasing the state tax on cigarettes appears to be working.

The state tax on a pack of cigarettes went up by $1 a pack Jan. 1, making the tax $1.53, or the 10th highest tobacco tax among all states. The tax increase was the result of a successful petition campaign by anti-smoking forces and a subsequent ballot measure that passed in November.

Michael Kenyon, who manages the collection of special taxes for the state Revenue Department, said first-quarter figures indicate 7.2 million packs of cigarettes were sold in South Dakota in that period, raising $14.1 million in revenue.

That compares with 11.1 million packs sold in January through March of last year and revenue of $5.9 million, he said.

"Consumption down, revenue up," Kenyon explained.

Some smokers may have stockpiled cigarettes in advance of the tax increase, and others have crossed into adjoining states to make purchases where the tax is less, he said.

"It's impossible to tell for sure which of the reasons … are responsible for the downturn," Kenyon said Friday.

Although the numbers are preliminary, cigarette sales seem to have rebounded somewhat this month, he added.

South Dakota smokers who had been going to Iowa for cheaper cigarettes may have given that up since the Iowa tax was raised by $1 a pack on March 16, Kenyon said.

"That should help us out," he said.

Cigarette distributors told state legislators in February that business was off as much as 60 percent. They said cigarette sales had fallen the most in the southeastern part of South Dakota because people were crossing the border into Iowa and Nebraska to buy cheaper smokes.

The current state tax in Iowa is $1.36 a pack. It's $1.49 in Minnesota, $1.70 in Montana, 60 cents in Wyoming, 64 cents in Nebraska, and 44 cents in North Dakota.

Jennifer Stalley of the American Cancer Society is pleased by the downturn in cigarette sales in South Dakota during the first quarter.

"It's a testament to the effectiveness of the tax," she said. "We know that if you raise the price of cigarettes significantly, you will reduce the number of people who are using them. That was the whole point behind increasing the tax."

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