Cigarette run!

This article about how convenience stores just on the other side of the Texas border - especially those in Louisiana - are doing a landmark business since the state cigarette tax went up by a dollar isn't surprising. This is one of those times when Texas' sheer size is a saving grace - for most people, it isn't even close to practical to search elsewhere for smokes. But let's look at the numbers that were reported, to see if we can learn anything:

There have been massive changes in Texas' tax rolls, though. The number of per-pack tax stamps sold in 2007 has declined by 27 percent compared to the first three months of last year, but revenues have doubled.

Texas is on pace to pull in nearly $1.1 billion in revenue for calendar 2007, compared with $509 million for 2006. Comptroller Susan Combs' revenue projection for fiscal 2008 -- starting this Sept. 1 -- is for slightly more than $1.1 billion, with $677 million going toward property tax relief; the 2009 projection is for more than $1.2 billion, with $731 million set aside.

OK. The tax was once forty-one cents, now it's a buck forty-one. It took 1.241 billion packs of ciggies to generate $509 million in taxes for 2006, while it'll take 780 million packs to bring in $1.1 billion. That's more than a 27-percent decline - it's a 37 percent decline. I'm guessing that sales were slower in the first quarter last year than they were in subsequent quarters, as people likely stocked up just before the tax increase took effect. That would in turn have a slight dampening effect on this year's sales - at least, those in the first quarter - so I can see where a slight increase over the next two years is feasible. It's safe to say that this is not a revenue source that will keep up with population increases, however, which frankly has been Texas' problem all along with its tax system.

Like I said, no surprises, but let's keep these numbers in mind when we get the real revenue results later on. It's not clear to me yet what pressure bootlegging, over-the-border sales, and people quitting or cutting back will have.

One more thing, for pure comic relief:

Texas law prohibits returning with more than one carton's worth of cigarettes without paying tax on the overage. The Texas Alcoholic Beverage Commission, assigned by law to collect the tax, runs checkpoints at the Mexican border and in international airport terminals, but not along domestic state lines where the rule is impossible to enforce. Officials are unaware of anyone ever voluntarily paying tax on excess cigarettes.

One wonders if they even bother to have a form to fill out for someone who might inquire about making such a voluntary payment. Some things just aren't worth the investment.

Posted by Charles Kuffner on April 22, 2007 to Budget ballyhoo