Philly Merchants Hurt by New Cigarette Tax

$2-per-pack tax to fund schools has many customers driving to the suburbs.

November 11, 2014

PHILADELPHIA – In an article this week, profiled local business owners who have been hit hard by the city’s new tax on cigarettes. According to some retailers, cigarette sales are down 80% since October 1 when a $2-per-pack tax went into effect, with funds designated to help the city’s public schools.

"Right now we're not making [any] money at the corner stores," retailer Ray Martinez, who owns Ray's Food Market in West Philly, told the news source. Merchants in his part of the city have been hit particularly hard, as his location is only a few minutes from the city line, so customers can easily drive to neighboring Delaware County to save money.

A pack of Newports that cost $6.35 prior to the tax is now $9.05. A carton is now almost $88, up from about $64, said the merchant. The decrease in tobacco business is also having a ripple effect on the rest of his business. Many local merchants are left wondering what the tax’s collateral damage will be on their livelihoods.

Merchants and related industries such as wholesalers have criticized politicians for not considering the financial implications of the tax on merchants who compete with retailers in the suburbs. While city revenue officials won't know the actual impact of "border bleed" and smoking cessation on the cigarette-tax revenue, estimates assumed about 13.8 million fewer packs would be sold in the city in the first full fiscal year of the tax.

So far, the tax has already been a boon for stores in neighboring Bucks, Delaware and Montgomery counties, as retailers see an increase in customers hoping to avoid paying the higher prices in Philadelphia, particularly more customers buying in bulk.