Friday, January 30, 2009

Utah Senator Allen Christensen's Proposed Cigarette Tax Hike Proposed In SB114 In Danger Of Going Up In Smoke; Paul Ray's HB219 Waiting In The Wings

On January 29th, 2009, the Salt Lake Tribune reports that SB114, representing District 19 Senator Allen Christensen's effort to raise Utah's tobacco tax, may be in danger of going up in smoke.

The proposed bill, which would raise Utah's current tobacco tax from 69.5 cents per pack to $2.00 per pack, has been diverted from the Health & Human Services Committee to the Revenue & Taxation Committee at the behest of Senator Curt Bramble (R-Provo), who serves on the latter committee. Christensen (R-North Ogden) believes the members of the Revenue Committee are hostile to the proposal. Lending creedence to that conclusion was a recorded remark by Senator Chris Buttars (R-West Jordan) to Bramble. "Now I don't have to kill it," Buttars leaned over and said to Bramble.

But Bramble merely explained that the taxation committee is where the cigarette tax increase should go. "Health and Human Services deals with health programs and social programs. Revenue and taxation deals with tax policy and this is a bill that deals with tax policy," he said.

The revenue generated from the proposed increase would be dedicated to tobacco cessation and smoker-related health programs. BlueInRedZion provides a more specific breakdown on targeted recipients. However, it would not replace any other taxes, unlike a competing proposal put forth by Governor Jon Huntsman Jr. Huntsman wants to increase the state's tobacco tax to $3.00 per pack, which would give Utah the highest cigarette tax in the country. The proceeds would be used to eliminate the rest of the state's sales tax on groceries.

But if SB114 does get snuffed out, there is a similar House version. HB219, authored by District 13 Rep. Paul Ray (R-Clearfield), would increase tobacco taxes by 5 cents per cigarette or more, depending upon bulk weight class. Ray's made a personal crusade out of this issue; his previous efforts were discussed on September 13th, 2008. Current Utah tobacco tax policy outlined HERE.

An interesting sidelight to this discussion is the revelation that former Rep. Greg Curtis, who was fired from his position by Sandy voters on November 4th, is now a lobbyist working for Philip Morris. Adding irony to the equation is the fact that Curtis is a devout Mormon. One commenter to the Tribune story speculated on the possibility that Curtis may have already "reached" the senators on this issue.

Utahns tend to support higher tobacco taxes. According to a recent Salt Lake Tribune poll, 66 percent of those interviewed statewide said they would support a tax hike. Support was identical among Republicans and Democrats, while, as expected, more LDS residents supported a tax increase (70 percent vs. 59 percent of non-Mormons).

But are Utahns thinking with their hearts or with their wallets? A windfall cigarette tax increase may bring an initial jump in revenue, but then it would subside and possibly decline, not just because of people quitting smoking, but also because of smokers driving to adjacent states to purchase cheaper cigarettes. Is this really smart? Isn't the purpose of taxation to RAISE revenue?

And cigarette bootlegging goes on elsewhere. On January 5th, 2009, Fairfax County (VA) police and Federal agents rolled up a multimillion dollar cigarette smuggling ring based in Virginia. The perps were counterfeiting Virginia tax stamps and smuggling the smokes to New York. It was reportedly the fourth such ring broken up during the past year. Creating the incentive - Virginia has a tobacco tax of 80 cents; New York has a tax of $4.25.

These revenue considerations are the reason why, on January 30th, the Utah Taxpayers Association criticized the proposed cigarette tax hikes. Not only do they think the proposed tax base is too narrow to be meaningful, but they also are concerned with loss of revenue through bootlegging. Since the Senate Finance Committee is reputed to already be skeptical about tobacco tax increases, the Utah Taxpayers Association's input is likely to stiffen their opposition.

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