Tobacco states consider higher cigarette taxes

Associated Press • Dec 18, 2008 at 12:00 AM

RICHMOND, Va. — Two of the nation’s top tobacco-producing states are weighing whether to raise cigarette taxes to plug budget deficits that have sent politicians scavenging for sources of revenue.

The governors of Virginia and Kentucky have each proposed raising their cigarette taxes — each currently 30 cents per pack — to help offset revenue shortfalls of $2.9 billion and $456 million, respectively.

Such a move was once unthinkable in Virginia, where Philip Morris runs the world’s largest cigarette plant miles from the state Capitol, and ceiling murals in the rotunda include impressions of the golden-brown tobacco leaf.

“I wouldn’t be surprised if all the tobacco-producing states aren’t at least considering it before long,” said Amy Barkley, who directs advocacy efforts in the major tobacco states for the Campaign for Tobacco-Free Kids.

Virginia’s tax would double to 60 cents a pack, just four years after its General Assembly passed a historic proposal to raise it from the nation’s lowest level at 2.5 cents. Kentucky, the second-largest tobacco producer in the U.S., would raise its tax by 70 cents to $1.

Lawmakers in the six major tobacco states — North Carolina, Kentucky, Tennessee, Virginia, South Carolina and Georgia — have historically been more reluctant than other states to turn to their cash crop for extra revenue.

But since 2002, 44 states and the District of Columbia have increased their cigarette taxes. Still, while the average tax nationwide is $1.11 per pack, it is 33.5 cents per pack in tobacco states.

“A while ago some people would have said there’s no way there’s going to be any tobacco tax increase in any of these states, but there has been and it’s been because of these dire budget needs,” Barkley said.

That doesn’t mean the taxes have had an easy time passing. In many cases, they’ve failed or stalled in states that still produce thousands of tons of tobacco and count on it for jobs.

Lawmakers in South Carolina, which has the nation’s lowest tax at 7 cents per pack and produces almost as much tobacco as Virginia, approved a 50-cent per pack increase earlier this year. But they failed to override a veto from Republican Gov. Mark Sanford.

Facing staggering budget shortfalls in 2003, Georgia hiked its tax by 25 cents a pack. Advocates now want more to fund health care, but Republican Gov. Sonny Perdue and the GOP-led Legislature aren’t making any moves to do it.

In North Carolina, the nation’s leading tobacco producer, the tax was just 5 cents until 2005, when lawmakers agreed to a 30-cent increase. But earlier this year, Gov. Mike Easley’s plan to boost teacher salaries never took off because it required raising the tax another 20 cents.

Kentucky Gov. Steve Beshear, a Democrat, wants to raise his state’s tax to avoid deeper spending cuts and massive layoffs. Kentucky is the country’s top producer of burley tobacco, an ingredient in cigarettes. But even a 25-cent raise stalled earlier this year in the state’s GOP-controlled Senate.

“We must all realize that we are in this together,” Beshear said earlier this month about his state’s fiscal crisis. “Survival is the name of the game.”

In Virginia, Democratic Gov. Timothy M. Kaine says the increase would generate about $148 million a year for health care. But he acknowledges that still wouldn’t match the estimated $400 million per year in Medicaid expenses caused by smoking in Virginia each year.

Bill Phelps, a spokesman for Philip Morris parent company Altria Group, said cigarette sales have declined annually over the last decade. Relying on cigarette taxes to fill budget holes is a short-term solution, he said, but it shouldn’t be considered a permanent resource for important programs like health care and education.

“These taxes provide short-term political gain for legislators, but they inflict long-term pain on many groups, including smokers and the retailers which sell cigarettes,” Phelps said.

While anti-smoking advocates generally support cigarette tax increases, it takes a big increase to both balance the budget and achieve their goal to make smokers quit.

The Campaign for Smoke-Free Kids’ Barkley said anything less than a $1 increase won’t cut smoking rates. Her organization will be fighting for increases in each of the tobacco states.

“We feel like if you’re going to do it, you need to make it count both in terms of health and revenue,” Barkley said.

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