Tobacco tax increases still appealing..

March 22, 2009 - 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. Tobacco lobbyists have 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.

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. Mississippi’s tax on cigarettes, at 18 cents a pack the nation’s third-lowest, has not been raised since 1985. With the federal stimulus package passed cigarette tax had lost momentum. But with Gov. Haley Barbour (a former tobacco lobbyist, non-longer opposed to an increase, 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.

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.

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.

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.

Reference: States Look at Tobacco to Balance the Budget by SHAILA DEWAN, The New York Times, 3/20/2009.

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