Proposed $2 cigarette tax sparks fear of sale of “loosies”
on October 19, 2016
Inside of Cigarette Depot on the corner of Sycamore Street and Telegraph Avenue, there are a couple of coolers at the far end of the store that hold drinks, and a few racks of other sundries, but mostly the store does what its name suggests: it sells cigarettes, along with tobacco and vapes and e-cigarette accessories.
Ronn Phan was behind the counter on a recent weekend, talking about Proposition 56. “I’m pretty sure it’s going to affect business,” she said. “Period.”
California Proposition 56 is a statewide November ballot measure that, if it passes, will increase the cigarette tax by $2, to $2.87 a pack, pushing the price of a pack of Marlboros in the Bay Area to nearly $10. A similar tax would be levied on e-cigarettes and associated products, like vape juice, which are currently untaxed under state tobacco tax laws.
Oakland store workers are worried about the steep price hike, which is aimed at convincing smokers—especially young smokers—to quit or to forego starting. But their main concerns are actually the unintended consequences of the measure, like increases in cigarette theft and illegal sales of single cigarettes, that will also undercut their bottom line.
Unlike earlier, smaller increases, Proposition 56 would raise California’s current tax rate by 230 percent. That price jolt is intentional. Research shows that even doubling a tax rate would reduce smoking by only as much as 5 percent, according to work published by the non-partisan National Bureau of Economic Research.
As Abby Neidleman, a smoker interviewed at the Oakland Market in West Oakland, said: Proposition 56’s jump is a lot.
“I think because it’s a low-income neighborhood, there will be more incentive to quit,” she said. “It would probably give me more incentive to quit.”
But, she added, even the $2 hike may not be enough incentive. “Smoking is a serious addiction,” she said. “It’s hard to quit.”
That addiction is one local store owners depend on for profits. The average convenience store relies on cigarette sales for about 35 to 40 percent of its profits, according to the Association for Convenience and Fuel Retailing.
Shop workers agree that it’s hard to predict how much those profits will be affected.
At Both Side Convenience, a cramped, narrow shop in downtown Oakland that sits between Telegraph Avenue and Broadway, Mohamed Ali said he thinks that the higher price will drive sales down. “It’ll be $2.87. That’s a lot,” he said, referring to the total state tax. “It will affect the store.”
But still, he added, “It’s addictive. Some people will pay it, no matter what the price is.”
It’s the addictive nature of smoking that both worries and reassures shop employees. Addiction may keep smokers buying cigarettes—or, if the price is too high, it may encourage them to find other ways to get their smokes.
The sale of single cigarettes, or “loosies,” is of particular concern, a fear which is backed up by research. Studies have found that loosie sales are particularly common in low-income, urban areas. The ubiquity of single cigarette sales is a particular barrier to smoking cessation among low-income and minority populations, and some studies suggest that the rising price of cigarette packs has contributed to the informal single cigarette market.
In West Oakland, Neidleman said that even without the proposed tax increase, the demand for single cigarettes is high. “I remember one time, I bought a pack of cigarettes, and by the time I got across the street, I almost had half a pack,” she said, adding that she gives hers away for free.
In the Bay Area, loose cigarettes typically go for about 50 cents, though prices can vary widely. But single cigarette prices tend to be higher than the per-cigarette price of cigarettes sold in a pack. At the California average of $5.50 for a pack of cigarettes, the cost of one cigarette works out to about 28 cents. After the tax increase, that price would be close to 38 cents. But smokers say the immediate gratification of a relatively low investment can make the difference seem negligible.
At Cigarette Depot, Phan said, “Of course they’ll be asking for single cigarettes.” She said the sticker shock of a pack of cigarettes may make people inclined to spend less money upfront and buy loose cigarettes illegally.
“When sales [prices] go up for cigarettes, they’re not going to want to buy a pack. They’re going to want to buy a couple,” she said. “There are people that will buy cigarettes and they can sell them on the street.”
And, she said, stores that sell individual cigarettes illegally will get more business than those that sell only packs. “Stores aren’t supposed to,” she said. “There are stores that do. It’s no secret.”
At Cypress Grocery, on Mandela Parkway and 10th Street in West Oakland, Mosad Abdula agreed. “I know a couple stores that sell them,” he said, adding that competition from those stores will be greater if Proposition 56 passes.
But loosie sales aren’t his only concern. He’s also worried that the increase in prices could lead to an increase in theft. A carton of cigarettes, he said, is “like $60 now, so it’ll go up to $80. The expensive ones, like American Spirit, it’ll go up to a hundred bucks.”
The Association of Fuel and Convenience Retailing, which publishes industry research reports every year, reports that stores have noted an increase in cigarette theft, suggesting that increasing tobacco taxes have contributed to that rise.
At Sana Market & Liquor on Telegraph Avenue and 37th Street, Abdul Ali was standing behind the counter. Rows of cigarette packs lined the wall behind him. “Of course it’s going to be difficult,” he said. “If someone steals ten cartons, that’s $1,000.”
Ali noted that cigarettes are already in one of the safer places in the store, behind the counter, and he isn’t sure what else he can do to prevent crime during business hours.
“What are you going to do, lock your store?” Ali asked. “You can’t lock your store.”
The association warns against assuming merchandise is safe because it is behind the counter, noting cases of armed robbery specifically targeting behind-the-counter cigarettes.
“High prices, high crime,” Ali said.
His words echoed those of other store owners: “Any increase in prices will be difficult.”
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