Grendel
03-21-2009, 02:42 PM
States Look at Tobacco to Balance the Budget
By SHAILA DEWAN
ATLANTA — Mississippi’s tax on cigarettes, at 18 cents a pack the nation’s third-lowest, has not been raised since 1985. Gov. Haley Barbour, a former tobacco lobbyist, has long opposed an increase.
But this year, state lawmakers have gone from giving little thought to a tobacco tax increase to arguing over how much the tax should go up and where the money should go.
And they are not alone. Budget shortfalls are pushing more than 20 states to look to tobacco for revenue, even those that have long been loath to touch cigarette taxes.
In the South, where such taxes have been lower than in the rest of the country, Arkansas has nearly doubled its tax, to $1.15 a pack, and Kentucky’s will double, to 60 cents, on April 1.
Increases are also under consideration in other tobacco-growing states like North Carolina, South Carolina and Georgia. With estimated state budget shortfalls nearing $50 billion, opponents of smoking see an opportunity to make headway with the most reluctant lawmakers.
“Everything lined up for us this year,” said Jennifer Cofer, the executive director of the American Lung Association in Mississippi. “Our state needed money; we’ve made a great case for it for almost seven years in a row; we have health care expenditures in astronomical proportions. It’s kind of like, why not now?”
But Ms. Cofer and other lobbyists have abandoned hope of seeing part of the money go to helping smokers quit or to pay for their health care. The Mississippi House and Senate have passed bills that differ on the amount of the tax and whether it should all go to the state’s general fund, or also be used to pay promised subsidies to local governments and to help people quit smoking, two proposals that Mr. Barbour opposes. The differences were being hammered out this week.
“Our position is to just increase the tax,” Ms. Cofer said. “We’re not proposing or pushing any earmarks.”
A 10 percent increase in the price of cigarettes reduces consumption by 3 percent to 5 percent, according to the Centers for Disease Control and Prevention, and deters young people from picking up the smoking habit.
Tobacco industry representatives have argued that tobacco taxes unfairly burden smokers, who are mostly working class or poor, and jeopardizes jobs at retailers like convenience stores, where more than 30 percent of total sales can come from cigarettes.
“Many of these states are asking the very definition of Main Street to bail out state capitals,” said Frank Lester, a spokesman for Reynolds American, which makes Camel and other major brands. “It’s just another bailout.”
States whose cigarette taxes are already high are also considering increases. In Oregon, now at $1.18 a pack, Gov. Theodore R. Kulongoski has proposed a 60-cent increase. In New Jersey, Gov. Jon Corzine is asking the Legislature for a 12.5-cent increase over the current $2.58. New York has the highest state tax on cigarettes, $2.75 a pack.
In Mississippi, cigarette tax increases in surrounding states have helped dampen fears that people would cross state lines to buy cigarettes. After a tax study commission appointed by Governor Barbour recommended an increase, he reversed his opposition but warned that the tax should be viewed as a matter of health policy, not a generator of revenue.
Bill Phelps, a spokesman for the Altria Group, the parent company of Philip Morris, argued that states often overestimated revenues from cigarette tax increases. From 2003 to 2007, there were 57 state tax increases, Mr. Phelps said, and in 41 cases they fell short of projections.
“We don’t think it makes a lot of sense to fund what are often important government programs with a revenue source that is in decline,” he said. “Just in the last 10 years, sales have declined an average 3 percent a year.”
But Frank J. Chaloupka, an economist and director of the Health Policy Center at the University of Illinois, Chicago, said cigarette taxes had not reached the threshold of diminishing returns. “We haven’t yet seen a case where if you raise taxes you don’t raise revenues,” Mr. Chaloupka said.
New Jersey did see a decline in revenue after its last tax increase, he said, but other factors, like a comprehensive smoke-free-air law that went into effect before the increase, drove down consumption.
Tobacco lobbyists have also argued that a 62-cent increase in the federal cigarette tax that will go into effect in April overburdens smokers and will drive down state collections. But the federal increase does not seem to have derailed state efforts, in part because smokers cannot avoid it by crossing state lines.
“It’s going to be an additional decline in revenues, but not all that dramatic,” said Richard Weiss, the director of the Arkansas Department of Finance and Administration.
Federal stimulus money has taken the wind out of the tax-increase proposals’ sails in some states. In Georgia, for example, a proposal to go to $1.37 from 37 cents a pack has remained in a legislative committee.
Peter Fisher, the vice president for state issues at the Campaign for Tobacco-Free Kids, said he hoped Georgia would consider the increase.
“For a lot of these states,” Mr. Fisher said, “it will come down to the last day of the session, when they realize they have to get the budgets down and they need X dollars.”Quite surprised this has even gained traction in the South. Goes to show just how tight things are getting I suppose.
Can't say I see this working, though. Taxing cigarettes seems to be a more effective strategy for reducing smoking and, as such a rather flawed way of generating revenue. Here in Michigan I've seen a few editorials looking for similar measures regarding alcohol sales, as well.
By SHAILA DEWAN
ATLANTA — Mississippi’s tax on cigarettes, at 18 cents a pack the nation’s third-lowest, has not been raised since 1985. Gov. Haley Barbour, a former tobacco lobbyist, has long opposed an increase.
But this year, state lawmakers have gone from giving little thought to a tobacco tax increase to arguing over how much the tax should go up and where the money should go.
And they are not alone. Budget shortfalls are pushing more than 20 states to look to tobacco for revenue, even those that have long been loath to touch cigarette taxes.
In the South, where such taxes have been lower than in the rest of the country, Arkansas has nearly doubled its tax, to $1.15 a pack, and Kentucky’s will double, to 60 cents, on April 1.
Increases are also under consideration in other tobacco-growing states like North Carolina, South Carolina and Georgia. With estimated state budget shortfalls nearing $50 billion, opponents of smoking see an opportunity to make headway with the most reluctant lawmakers.
“Everything lined up for us this year,” said Jennifer Cofer, the executive director of the American Lung Association in Mississippi. “Our state needed money; we’ve made a great case for it for almost seven years in a row; we have health care expenditures in astronomical proportions. It’s kind of like, why not now?”
But Ms. Cofer and other lobbyists have abandoned hope of seeing part of the money go to helping smokers quit or to pay for their health care. The Mississippi House and Senate have passed bills that differ on the amount of the tax and whether it should all go to the state’s general fund, or also be used to pay promised subsidies to local governments and to help people quit smoking, two proposals that Mr. Barbour opposes. The differences were being hammered out this week.
“Our position is to just increase the tax,” Ms. Cofer said. “We’re not proposing or pushing any earmarks.”
A 10 percent increase in the price of cigarettes reduces consumption by 3 percent to 5 percent, according to the Centers for Disease Control and Prevention, and deters young people from picking up the smoking habit.
Tobacco industry representatives have argued that tobacco taxes unfairly burden smokers, who are mostly working class or poor, and jeopardizes jobs at retailers like convenience stores, where more than 30 percent of total sales can come from cigarettes.
“Many of these states are asking the very definition of Main Street to bail out state capitals,” said Frank Lester, a spokesman for Reynolds American, which makes Camel and other major brands. “It’s just another bailout.”
States whose cigarette taxes are already high are also considering increases. In Oregon, now at $1.18 a pack, Gov. Theodore R. Kulongoski has proposed a 60-cent increase. In New Jersey, Gov. Jon Corzine is asking the Legislature for a 12.5-cent increase over the current $2.58. New York has the highest state tax on cigarettes, $2.75 a pack.
In Mississippi, cigarette tax increases in surrounding states have helped dampen fears that people would cross state lines to buy cigarettes. After a tax study commission appointed by Governor Barbour recommended an increase, he reversed his opposition but warned that the tax should be viewed as a matter of health policy, not a generator of revenue.
Bill Phelps, a spokesman for the Altria Group, the parent company of Philip Morris, argued that states often overestimated revenues from cigarette tax increases. From 2003 to 2007, there were 57 state tax increases, Mr. Phelps said, and in 41 cases they fell short of projections.
“We don’t think it makes a lot of sense to fund what are often important government programs with a revenue source that is in decline,” he said. “Just in the last 10 years, sales have declined an average 3 percent a year.”
But Frank J. Chaloupka, an economist and director of the Health Policy Center at the University of Illinois, Chicago, said cigarette taxes had not reached the threshold of diminishing returns. “We haven’t yet seen a case where if you raise taxes you don’t raise revenues,” Mr. Chaloupka said.
New Jersey did see a decline in revenue after its last tax increase, he said, but other factors, like a comprehensive smoke-free-air law that went into effect before the increase, drove down consumption.
Tobacco lobbyists have also argued that a 62-cent increase in the federal cigarette tax that will go into effect in April overburdens smokers and will drive down state collections. But the federal increase does not seem to have derailed state efforts, in part because smokers cannot avoid it by crossing state lines.
“It’s going to be an additional decline in revenues, but not all that dramatic,” said Richard Weiss, the director of the Arkansas Department of Finance and Administration.
Federal stimulus money has taken the wind out of the tax-increase proposals’ sails in some states. In Georgia, for example, a proposal to go to $1.37 from 37 cents a pack has remained in a legislative committee.
Peter Fisher, the vice president for state issues at the Campaign for Tobacco-Free Kids, said he hoped Georgia would consider the increase.
“For a lot of these states,” Mr. Fisher said, “it will come down to the last day of the session, when they realize they have to get the budgets down and they need X dollars.”Quite surprised this has even gained traction in the South. Goes to show just how tight things are getting I suppose.
Can't say I see this working, though. Taxing cigarettes seems to be a more effective strategy for reducing smoking and, as such a rather flawed way of generating revenue. Here in Michigan I've seen a few editorials looking for similar measures regarding alcohol sales, as well.