Answer Man

Cigarette smokers burned by inflation, taxes

Think of all that money gone up in smoke.
Think of all that money gone up in smoke. Newport News Daily Press

Q. I think you're fantastic, but I think I’ve got a question that’s going to stump you. I’ve been working at the same store for 37 years, and I remember when cigarettes used to cost about 50 or 55 cents a pack and they were all the same price. So why today do they cost up to $7 a pack when there are so many tobacco growers and why do they all have different prices?

— Gary Simmons, of Fairview Heights

A. Sounds like you’re blowing a little smoke of your own, but don’t worry. You sufficiently lit up my interest because your question is really quite simple. I can think of five reasons to explain your query — inflation, brand proliferation, taxes, taxes and more taxes. Let’s take these one at a time:

If you’re of a certain age like I am, you’ll remember when stores proudly offered cigarette vending machines that hawked 20 of the most popular brands of the day. You’d pop in maybe 50 cents, pull a chrome lever and listen for a pack of your favorite coffin nails to clunk into the slot at the bottom.

Now those vintage machines are relegated to antique sales because you’d spend an hour inserting enough coins to buy a pack. Of course, that’s true with everything. I remember when Burger Chef had sales of seven double-burgers for a dollar, cereal used to be 30 or 40 cents a box and the Lincoln Theatre would show 12 summer movies for a buck (soda and popcorn was another quarter).

It’s called inflation, and, like everyone else, cigarette manufacturers can’t escape it. They have to pay more for the tobacco, more for their workers, more for marketing, etc. So if you plug prices into an inflation calculator, you’ll find that your 50-cent pack of ciggies in 1965 now should cost $3.77 through inflation alone.

That’s just the start. With state and federal governments starving for revenue, most (not all) have raised cigarette taxes astronomically in the past couple of decades. Let’s take Washington, D.C., first. From 1910 to New Year’s Eve 1982 — more than 70 years — the federal excise tax on a pack of cigarettes barely budged, growing from 2.5 cents to 8 cents a pack.

After that, it took off like a rocket, doubling to 16 cents in 1983 before rising to 24 cents in 1993 and 39 cents in 2002. Then, on April 1, 2009, smokers were burned by a 160 percent increase to $1.01 a pack, which is where it stands now.

If you think that’s bad, just wait until you hear how states and cities have bellied up to this revenue trough. In 1921, Iowa became the first state to directly tax cigarettes. Eleven more joined in by 1930. By 1950, the number was up to 40. But the rates were just 1 cent to 5 cents a pack, except in Louisiana, which dared to pinch smokers for 8 cents.

As smokers know now, those were the good ol’ days. Today, all 50 states and D.C. impose an excise tax ranging from $4.35 a pack in New York to just 17 cents in Missouri. In Illinois, it’s $1.98, which is currently 17th highest in the nation, according to a study released Monday by the Campaign for Tobacco-Free Kids.

That’s still not counting local taxes that some cities have started to levy. As a result, the highest combined state-local tax rate is $6.16 in Chicago followed by New York City at $5.85. Add the federal tax and the cost of the cigarettes themselves and you’re talking $10.50 a pack in some places.

Get the picture now? With federal and state excise taxes now accounting for an average of 44 percent of the cost, the new Tobacco-Free Kids study calculates the average price for a pack of cigarettes nationwide at roughly $6.23, pretty much in line with the price your store is charging.

So what explains the differences in price? Let me briefly offer a few possibilities.

As best I remember, there were only a few major brands 50 years ago — Winston, Kent, Lucky Strike, etc. — and they came in only one or two varieties. (Remember when Virginia Slims caused a sensation when they were introduced in 1968?)

Now if a supermarket checkout clerk has to chase down cigarettes for a customer, she may be gone for two or three days as she (hopefully) picks the right variety from a dizzying array of brands, lengths and other characteristics. It’s only logical that, like ice cream or cars, prices will vary.

It also may partly be a matter of perception. When cigarettes were 50 cents a pack, the difference between 45 and 50 cents didn’t seem like much so you may not have even noticed. Yet when you think about it, it’s exactly the same percentage as the difference between, say, $5.40 and $6 today.

Also, with cigarette prices so high, more generic brands have entered the market just as supermarkets now offer store-brand products at a fraction of the price of national brands. And, lastly, companies have been waging price wars as discount brands steal their business. In 2003, for example Philip Morris cut prices by 65 cents a pack for its leading brands, and R.J. Reynolds followed suit.

Some final fascinating figures: Tobacco tax collections have climbed from $1.1 million in 1890 to $17 billion in 2014. Cigarette consumption has dropped from 4,259 per adult in 1965 to about 1,100 in 2013. There is good news about the rise in prices, too: Each 10 percent increase in price has reduced consumption 3 percent to 5 percent.

But the Centers for Disease Control estimates that smoking still costs the U.S. economy $326 billion in medical bills and lost productivity every year.

Today’s trivia

True or false: Most tobacco farmers have stayed in the business over the years.

Answer to Tuesday’s trivia: If you thought George Washington was the first father of his country, you’re a little late — about 2,400 years. After defeating the Gallic army in 386 B.C., Roman warrior-statesman Marcus Furius Camillus was declared Pater Patriae — father of the country. Julius Caesar also earned the title three centuries later.

Send your questions to Roger Schlueter, Belleville News-Democrat, 120 S. Illinois St., P.O. Box 427, Belleville, IL 62222-0427, rschlueter@bnd.com or call 618-239-2465.

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