Pipe tobacco tax loophole may have cost New York $17 million over two years

James Shields hadn't thought much about making his own cigarettes until he realized how much less money it would cost. Shields can buy enough loose tobacco and cigarette tubes for a carton of cigarettes for approximately the price of a normally priced pack of cigarettes. Now he's a regular at a small hand crank machine in the Smoker's World store in Syracuse.

"They tax your money before you get it in the check, they tax it again when you spend it. It's all about taxes," said Shields as he made a cigarette.

When it comes to tobacco, store prices are based on taxes. In April 2009 the federal government raised the tax on loose cigarette tobacco to $24.78 per pound. The tax on loose pipe tobacco is only $2.83. Since 2009, stores like Smokers Choice have been seeing more and more people looking to buy pipe tobacco and tubes - to make their own cigarettes. Smoker's Choice has a small hand operated machine that lets customers pack pipe tobacco into paper tubes. Donna Bruno from the store says loose tobacco is their biggest seller.

"Cases and cases of tobacco a week. Thousands of dollars. Thousands every week," said Bruno on Thursday.

When more smokers turned to lower taxed pipe tobacco, that meant less money in taxes for New York State. On Wednesday, the Centers for Disease Control estimated that the pipe tax loophole has cost New York about $17 million over the past two years.

Anti smoking advocates want the pipe tobacco loophole closed and say more expensive tobacco will lower smoking rates."---{>}

"We know cigarettes contribute to so many terrible diseases. So this is a real huge concern for the American Cancer Society. We don't want to see all the progress that we've made in being able to raise these taxes to go backward," said Erin Shuff from the American Cancer Society.

At the Smoker's Choice store, customers said if the government raised taxes on pipe tobacco, it would take away their only way to get low cost cigarettes.