Cigarette Tax and Food Tax Swap Bills Move Forward

The governor’s cigarette tax increase today/yesterday leaped its first hurdle, a hostile House Agriculture Committee. The jostling was so severe that for hours afterwards no one knew how much of the tax had survived – all forty cents or only twenty cents?

Amendments to the bill first hiked the amount of money for agricultural programs to 21-million dollars…and then reduced the rate of the tax increase from forty to twenty cents.

But then the committee passed another amendment. This one takes the sales tax off food eligible for WIC – the Women, Infants and Children program. The governor’s House floor representative, Gary Odom of Nashville, says the confusion starts there.

“That amendment … there is some dispute over whether the amendment actually reinstated the forty cent tax increase, or whether it was working with the 20-cent reduction, to make it a 20-cent per pack increase on the cigarette tax.”

Odom will try to repair the bill as it goes through the House Finance Committee.

Meanwhile a different bill sponsored by Senator Doug Jackson of Dickson emerged from a tax subcommittee in the Senate. It would raise the cigarette tax by forty-four cents and would use the money to replace part of the state sales tax on food – which is not a priority of the Bredesen administration.

Jackson said the bill may be useful late in the session.

“I do think this bill can be a vehicle for compromise, and quite honestly that’s why I asked the subcommittee to move it on to the full committee. And we’re going to hold it there and wait and see if this is needed.”

WEB EXTRA

House Agriculture is the only committee in the House with a majority of Republicans. House Democrats had to bring Speaker Jimmy Naifeh to the committee meeting to fight off hostile amendments from Republicans who insisted that despite Governor Phil Bredesen’s stated intent, the cigarette tax does not put “education first.”

When tobacco was a top crop in Tennessee, the House Agriculture Committee traditionally was given control of bills that might affect that industry. That’s one reason Tennessee’s cigarette tax is the fourth lowest in the nation at only 20 cents a pack.

But the possibility of raising the cigarette tax has been staked out as the most palatable of any possible taxes. Republicans began this year arguing that the cigarette tax was, after all, a tax increase, and thus something they opposed.

Senate Speaker Ron Ramsey and other Republican leaders quickly suggested that if the tax were that easy to pass, it should perhaps be held in abeyance in case something important came up.

Tennesseans for Fair Taxation, a public interest group interested in tax reform, has argued for a straight swap, cigarette tax increases replacing grocery sales tax.

Senator Doug Jackson’s Senate bill differs from the TFT bill and represents more of a “beginning” rather than an ideal case. “The bill proposes to increase the tobacco tax by 44 cents a pack on cigarettes and then to reduce the sales tax on food by half, and that would be the state portion of the sales tax on food, which would be 3 cents.”

Jackson argues that health issues caused by cigarettes cost $1 billion a year in the state, both public and private dollars. “So it’s time that we put a realistic tax on tobacco, so smokers pay their way, and no longer ask the rest of society to subsidize their addiction.”

To check the status of the bills, go to the legislative web page http://www.legislature.state.tn.us/ . Click on “Legislation,” click on “bill number index” and click on the range of numbers that will contain

• HB 2354 Odom/SB 2326 Kyle, the cigarette-tax-for-schools bill. When we looked, the Tuesday amendments had not yet been posted.

• SB 0093 Jackson/HB 0114 Shepard, the 44-cent cigarette tax for grocery tax swap. The bill has sponsors in both houses from both parties.