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BOSTON -- Massachusetts smokers, already bracing for a 75-cents-a-pack tax increase on cigarettes that is making its way through the Legislature, may be in for another price shock this summer.
Starting July 1, the state intends to prohibit cigarette manufacturers from offering retail discounts that in recent months have averaged about 60 cents a pack. Officials say the combination of the tax increase and the discount prohibition could make Massachusetts cigarettes the most expensive in the country, boosting their current price by 30 to 35 percent, the Boston Globe reported.
"It's a huge price increase for consumers," said Thomas Ryan, a spokesman for Philip Morris, the manufacturer of category leader Marlboros.
State lawmakers are counting on the higher cigarette taxes to help balance the budget, and antismoking advocates are hoping the higher prices will persuade many smokers to kick the habit. But many retailers who sell cigarettes worry that the higher prices will end up driving smokers looking for less expensive cigarettes to the Internet or to New Hampshire, with disastrous consequences for their businesses, the report said.
The New England Convenience Store Association, for example, says its members derive 33 percent of their revenue from cigarette sales, with cigarette buyers accounting for a large portion of other purchases as well.
State lawmakers also fear the legislation could be a lethal for retailers. "You could deal a crippling blow to an awful lot of the small retailers in this state," said Rep. Paul Caron, (D-Springfield) who has tried unsuccessfully to block the discount prohibition and is now seeking a delay in enforcement.
According to a recent report from the Federal Trade Commission, the tobacco industry spent $3.91 billion on promotional allowances in 2000, up 10.9 percent from the year before. Promotional allowances accounted for nearly 41 percent of all tobacco advertising and promotional expenditures in 2000.
"Massachusetts is the only state that has interpreted minimum pricing in this manner," Ryan said. "We disagree with their re-interpretation of the law."
Ryan said it's likely the discount prohibition will result in sharply higher prices for smokers in Massachusetts, but he acknowledged the company is looking at alternative ways to continue discounting its product.
Cigarette manufacturers could legally reduce their retail prices by discounting the price they charge wholesale distributors, but to date they have resisted that approach, the Globe reported. They have preferred to deal directly with retailers to gain greater control over how their product is marketed and sold.