The federal government's 155 percent hike in the excise tax on
cigarettes is being blamed as the main reason for the increase. But
the new tax doesn't go into effect until April 1 and it will only be
a 62-cent-per-pack addition, so what's happened?
Some manufacturers began phasing in the excise costs early, and
some retailers and distributors have raised prices. In addition,
manufacturers have been raising prices on some brands independent of
the excise tax issue.
Some stock analysts say the early and larger-than-expected
increases are an attempt by the tobacco companies to shore up their
profits in anticipation of predicted sales declines after the excise
tax increase takes effect next month.
Some smokers who had planned on stocking up on cigarettes before
April 1 have been hit by sticker shock.
Bill Phelps, spokesman for Altria, parent company of Philip
Morris U.S.A., said last week that prices for its cigarettes --
including Marlboro, Virginia Slims and Parliament -- rose 71 cents a
pack because of the excise tax.
David Howard, spokesman for R.J. Reynolds Tobacco Co., said his
company would raise prices on its Kool, Camel, Winston and Salem
cigarettes by 44 cents. He would not say whether prices could go up
again to cover the 62-cent tax hike.
"We don't set the price at retail," Howard noted. "We sell
product to our wholesalers, who sell to retailers, then, based on
their audiences, decide what they can set the price at."
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Altria's Phelps said angry customers need to voice their opinion to
lawmakers who set taxes on cigarettes. He said half the cost of a
pack of cigarettes comes from taxes on tobacco by federal, state and
Illinois' cigarette tax is currently 98 cents a pack. Coupled
with the federal tax and the fact that some counties such as Cook
County have an additional $1-a-pack tax, this will mean the combined
taxes will push major-brand cigarettes over the $8-per-pack price in
And smokers might not be done getting taxed just yet. On
Wednesday of last week, an Illinois Senate committee gave
preliminary approval to a $1-a-pack increase.
Anyone for quitting?