The Senate will vote on an identical bill next week, leaving open the possibility that the legislature's budget negotiators could still consider the tobacco tax as a source of revenue for the state's cash-starved $77 billion, two-year budget, said the report. If legislators reject the idea [image-nocss] of raising the state's tax on cigarettes from 30 to 60 cents per pack, they will have to find another way to come up with $148 million to pay for Medicaid at a time when the state faces a shortfall of at least $2.9 billion.
Wednesday's 8-to-2 vote by the House Finance Committee panel was a blow to the governor, the report said, but Republicans and Democrats said they oppose raising taxes on a single industry during tight economic times, especially when that industry provides the state with so much money.
Del. James P. Massie III (R) said he was opposed for several reasons, including wanting to protect one of the world's largest cigarette makers, Philip Morris, which in recent years has moved its headquarters to Richmond and opened a research center there. "It violates my basic sense of fairness to...turn around and double the tax on them," Massie said.
Tobacco was once the foundation of Virginia's economy, and the state is still home to thousands of tobacco farms. Altria, the parent company of Philip Morris, employs more than 5,000 workers. "We continue to believe that the tax...could negatively impact Virginia manufacturers and tobacco growers and retailers and the jobs that they provide," Altria spokesperson Bill Phelps told the newspaper.
Del. Robert H. Brink (D), who introduced the bill on Kaine's behalf, said he did not intend to "demonize" tobacco. "I recognize the important role of tobacco and cigarette companies in the commonwealth's economy. The reason I did it is I am very concerned about the effect of not enacting this increase on the state's Medicaid budget."
A second proposal, to raise the tobacco tax by 89 cents a pack to bring it up to the national average, was unanimously defeated, said the report.
The tobacco tax's future remains uncertain. Senate Majority Leader Richard L. Saslaw (D) supports the increase, but House Speaker William J. Howell (R) opposes it. Both men will have considerable influence in writing the state's final budget.
Kaine's proposal would generate about $148 million a year, though that could diminish in future years if more people stopped smoking. The national average tax is $1.20 per pack. Forty-six states impose a higher tax on cigarettes than Virginia does, the report said.
If approved, a cigarette tax increase would be Virginia's second in five years. In 2004, the General Assembly raised the tax from 2.5 cents, the nation's lowest at the time, to 30 cents.
Separately, an effort to boost the state cigarette tax by 50 cents a pack died a speedy death in the Wyoming legislature Wednesday, reported The Casper Star-Tribune. The House Revenue Committee took testimony on House Bill 224 and then declined to even consider the bill. It died for lack of a second.
HB 224, sponsored by Rep. Lori Millin (D), would have raised the tax on a pack of cigarettes from the current 60 cents to $1.10. The increase would have generated an estimated $21 million a year in additional revenue for local governments, according to a state-generated estimate.
Marian J. Schulz, lobbyist for Philip Morris USA, said the cigarette excise tax is not a dependable source of revenue for local governments, and is "aggressive and unfair to adults who smoke."
Schulz said the tax increase would hit the poorest Wyoming residents the hardest, and retailers would suffer because of the resulting decrease in cigarette sales. She noted that convenience stores nationwide depend on tobacco products for more than a third of their revenue. "Philip Morris USA believes Wyoming smokers already pay a fair amount of tax on the cigarettes they purchase," Schulz told the paper.
Millin said after the vote that she was not shocked that the committee killed the bill, though she was somewhat surprised the panel declined to even take a vote. "I think the Revenue Committee tends to listen to the big U.S. tobacco companies. I think they tend to listen to those groups," she said. "I knew it was an uphill battle."
The state last raised the tax on cigarettes in 2003, from 12 cents to 60 cents. Thirty-five states levy a higher cigarette tax, according to the report,citing the Council of State Governments.
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