Smokers Head for the Border to Avoid Cigarette Tax Increase

Smokers Head for the Border to Avoid Cigarette Tax Increase
August 1, 2004

Michigan smokers say they'll smoke 'em while they got 'em. And then get more. In Indiana.

On July 1, a 75-cents-per-pack cigarette tax increase [took] effect in Michigan. The tax increase, which levies a total tax of $2 per pack on Michigan cigarettes compared to a 55.5-cents-per-pack tax in Indiana, is going to have a significant effect on businesses, say people on both sides of the border.

In New Buffalo Township, minutes from the Indiana state line, the last gas station in Michigan stocks only one shelf of cigarettes.

Ann Carter, manager of the Plaza 1 Truck Stop on Michigan 239, said the station doesn't make any money off the 200 or so packs of cigarettes it sells each month. The store carries them as a courtesy to customers.

"Most of our business is truck drivers who are in a hurry," she said. "They buy what we have and they don't care what they cost because they just want to make a quick pit stop and get back on the road. We don't carry much. When we don't have what they want I just send them down the street."

Carter said the tax increase will have very little effect on her business.

"We only sell very few as it is. Now, we probably won't sell any," she said.



Business Booms in Indiana

With the tax increase, store workers on the other side of the border say they're expecting more business from Michigan smokers.

A quarter mile down the road toward LaPorte, Mike's Country Store is one of three stores near the state line catering to smokers.

Clerk Carrie Swedersky estimated at least half the store's business comes from cigarette buyers.

"Well over half" the cigarettes she sells are to people from Michigan or Illinois, where the tax is also high, she said.

"We get a lot of people coming down here to buy cartons," said Swedersky, smoking a cigarette as she worked. "I know if I lived in Michigan I'd come down here."

Outside the store, a Bangor man who would not give his name arrived from a 50-mile trip to buy five cartons of cigarettes. The man said he has been making the trip to Indiana for some time.

"I think it's totally ridiculous," he said. "I'm not going to buy [cigarettes] in Michigan, I'll tell you that. I'll drive down here to buy one pack if I have to, even if it costs me $10 in gas to do it. I'll do it just to spite them."

The man said the tax isn't fair and he won't pay it on principle.

"If you want to have a fair tax put a tax on toilet paper or something, that way we could all pay the debt," he said.

The Smoke Shop near South Bend is only a few feet south of the state line.

Clerk Heather Moffitt said the store expects business will boom.

"We're ready ... We know people are going to come here like crazy," she said. "People know about [the tax increase] but it doesn't hit them until that 75 cents is in their face."

Moffitt said her customers often complain of being "picked on."

"Everybody has a bad habit but this seems to be the one they're cracking down on."



Possible Police Crackdown

Moffitt said many of her customers worry about being arrested for bringing cigarettes back over the Michigan border.

"The police are really intimidating," she said. "Indiana cops were parked across the street for two hours the other day, and I saw them pulled up to Michigan cops, talking to them.

"But I've never heard of anybody getting busted."

According to law, it is illegal to possess any pack of cigarettes without a Michigan tax sticker in the state of Michigan, said Sgt. Rob Davis of the Michigan State Police's Niles post.

A person who has a small amount of untaxed cigarettes could be arrested and charged with a misdemeanor, Davis said, although he doesn't think the law will be strictly enforced.

"Most likely, if you have one pack no one's going to have a problem," he said.

Niles post Commander Sgt. Forrest Perkins said three officers from his post took a training course offered by the state police tobacco fraud unit, and his officers will be on the lookout for Indiana cigarettes.

Perkins said his officers will take a "proactive approach" and could arrest people who have as little as one or two cartons.

Perkins also said his post is in contact with police in Indiana.

"If they see something, they'll alert us," he said.

Berrien County Sheriff Paul Bailey said enforcing the cigarette tax law is not a top priority for his department.

"We aren't going to waste our resources having patrols watching people buy cigarettes," he said. "It's one of those laws that's really hard to enforce. There's no way you could have enough people watching the Indiana border."



Area Businesses Worry

Back at Mike's Country Store, Louann LaDuke, a sales representative for R.J. Reynolds Tobacco Co. visiting the store to discuss a contract, said the tax increase will have a huge effect on the stores she sells to.

LaDuke said Michigan store owners are worried.

"Not only are you losing tobacco, you're losing other business from smokers who stop in and buy snacks, gasoline, and other things."

Guy Arrans, chief operating officer at St. Joseph-based Primar Petroleum, said the tax increase is going to hurt business at the 14 area convenience stores and gas stations Primar owns and the 30 other independently owned stations it supplies.

Arrans said Indiana stores are already pulling away Primar's customers. With the new tax the company could potentially lose half its cigarette buyers in several markets.

"People are going to break the law," he said. "They crave this product and they're going to get it.

"Ten cases of cigarettes, which you could fit in the trunk of a car, would have $4,650 in additional Michigan taxes on it."

Arrans said politicians who justify the tax by saying that it will help smokers by encouraging them to quit are misleading voters.

"They're building more and more of the budget on smokers but they keep saying they want people to quit," he said. "Why would they build a budget on what they hope will be a vanishing tax base?"

Arrans also pointed out that, since Michigan charges sales tax atop the cigarette tax, the real tax increase is $2.12.

"They're killing us right now," he said. "They've sacrificed businesses in Southwest Michigan to balance the budget."

Governor Jennifer Granholm (D) proposed the tax increase to help cover the state's Medicaid deficit. Granholm estimated that it will bring in an additional $97.1 million dollars before the end of the current fiscal year, September 30, and that it will bring in an additional $313 million next year.


Martin Cizmar is a staff writer for the Herald-Palladium in southwest Michigan. His email address is mcizmar@heraldpalladium.com. Reprinted with permission. Copyright 2004 The Herald-Palladium.