Business owners say cigarette tax hike could backfire

Myrtle Beach, SC - By Chandi Lowry - bio | email

MYRTLE BEACH, SC (WMBF) - Legislators expect a new 50 cent cigarette tax increase in South Carolina to bring over $100 million to the state, but some business owners who sell cigarettes disagree.

Nick Goebel, owner of Nicks Cigar World, said a master settlement agreement payment is money given to the state for the general fund. The payment comes from manufacturers, like Philip Morris, and is based on how many cigarettes are sold in South Carolina.

Goebel said if people don't buy cigarettes because of the price hike, the state won't see as much money.

"Volume has got to come down, and I believe it's going to come down enough that it will outweigh increase they make on the cigarette tax," Goebel explained.

According to manufacturers, close to $71 million was generated in 2007 from MSA payments. The sales tax on cigarettes brought in $77 million and the money that came into the state from the cigarette tax generated about $27 million.

The manager of Nicks Cigars, Jamie Goebel, said South Carolina will get hit hard because of lower prices in neighboring states.

"It's a huge jump and we are nowhere near now where our other states are, Virginia, Georgia North Carolina," she said. "Now that the tax is raised, we are going to lose a big profit from all of our cigarette sales."

Lona Singletary agreed with legislators and stated people will continue to smoke no matter how much cigarettes are and the money will pour into the state.

The new cigarette tax goes into effect on July 1.

Copyright 2010 WMBF News. All rights reserved.