Arkansas Governor's proposed tobacco tax increase..

February 5, 2009 - Governor Mike Beebe planning to rally support for his $87.8 million proposal to hike tobacco taxes. Beebe's proposal would raise cigarette and chewing tobacco taxes to pay for the statewide trauma system and a host of other health programs. Meanwhile, opponents of the governor's tax hike say they plan to file their proposal to fund only a trauma system by increasing driving fines early this week.

Arkansas remains one of only a handful of states without a trauma system — a unified network of hospitals that can route victims of car crashes, electrocutions and other serious injuries quickly to specialists. Earlier estimates put the annual cost of fully funding a trauma system at $25 million.

Beebe's called for a 56-cent-a-pack hike in the state's tax on cigarettes and wants to raise the taxes on smokeless tobacco by an additional $10 million. Opponents say raising the fines for drunken and reckless driving can raise $27 million annually for a trauma system.

Beebe is selling the tax hike as a way to pay for $177.9 million in health programs that would also be funded by federal matching dollars. The proposed health plan includes an expansion of the state's health insurance program for low-income children, money for food banks and increased funds for community health centers.

Rep. Gregg Reep, D-Warren, filed an amendment to HB1204, the tobacco tax bill.
Reep wants to change the tax rate on the first sale to wholesalers or retailers of non-cigarette tobacco products from 19 percent to 36 percent of the manufacturer's selling price. Also, in the bill's original version, "moist snuff" is taxed at a different rate than other tobacco products, with a portion of the revenue -- $962,000 -- going to Special Revenue. Reep has deleted this language, thereby lumping "moist snuff" in with "tobacco products other than cigarettes," and has changed the tax rate for products other than cigarettes from 19 percent of the manufacturer's selling price to 36 percent of the manufacturer's selling price.

A major cigarette manufacturer says low-income Arkansans will be hurt most in the wallet and others will drive across borders to buy smokes. Altria contends that a packper-day smoker in Arkansas pays $677 a year to the federal and state governments. If Beebe's plan passes, that would go up to $896 a year and disproportionately hurt poor people, the company says.



Surgeon General Joe Thompson: "Tobacco is the major burden on our citizens, and a strategy to increase its price is a well-proven mechanism to keep youth from starting smoking and to reduce adult smoking. The health care programs are broadly based and meet a lot of needs."

Reference: Cigarette tax hike could fund Arkansas trauma systemArkansas Online, 8/11/2008; UPDATED: Legislators File Beebe's Cigarette Tax Bill
by Mark Carter, ArkansasBusiness.com, 1/26/2009; Arkansas lawmakers to consider tobacco tax hikeby Associated Press, 2/4/2009; Capitol Round-up: Reep Files Amendment to Tobacco Tax Bill by Arkansas Business Staff, 2/2009; Cigarette tax proposal draws fire by SETH BLOMELEY, Arkansas Democrat Gazette, 1/25/2009.

Related news brief: U.S. States Considering Tobacco Tax Increase...