US: Kasich Again Takes Shot at Raising Cigarette Tax

Source from:  The Toledo Blade 01/30/2015

In advance of Gov. John Kasich again trying to convince lawmakers to raise Ohio's cigarette tax, anti-tobacco activists on Tuesday released a report suggesting that the state could raise $1.5 billion over five years with a $1 hike per pack.

The governor has made it clear his third two-year budget proposal to be unveiled Monday will include a proposed hike, but it's not clear how much it would be. Last year, he proposed hiking the tax 60 cents over two years to $1.85 a pack. The idea was quickly stamped out by fellow Republicans in the General Assembly.

"Why should taxes on tobacco not be higher to pay for a reduction in the income tax?" Mr. Kasich asked in December. "I'll tell you why. Lobbyists, that's why. ... There's no doubt in anybody's mind who's in medicine that if you raise the tax on cigarettes, you'll have a healthier society."

Mr. Kasich's 2014 plan also would have extended the tax to cigars, electronic cigarettes, chewing tobacco, and pipe tobacco, all of which are subject to lower rates than cigarettes.

Last year's plan was part of broader tax reform that would have included higher taxes on oil and natural gas drilling and business gross receipts.

Lawmakers found other ways to cut the income tax without enacting the tax hikes.

Ohio's cigarette tax of $1.25 is 29th among the 50 states and Washington, but it's well above most of its neighbors. Michigan, at $2, has the highest rate among neighboring states.

A rate of $1.85, assuming a 60-cent hike such as the one Mr. Kasich proposed last year, would move Ohio up to 17th. A rate of $2.25, as the anti-tobacco activists propose, would rank Ohio ninth. New York has the nation's highest rate at $4.35 per pack.

Tuesday's report was conducted by Frank Chaloupka, an economist and tobacco policy expert at the University of Illinois at Chicago, in conjunction with the Investing in Tobacco Free Youth Coalition. It suggests that an immediate $1-per-pack increase in the tax would generate $342 million more for the state in the first year and $1.5 billion over five years. The report suggests it would also convince 65,000 youths not to take up the habit, convince 73,000 adults to quit, and prevent more than 40,100 smoking-related deaths.

Shelly Kiser of the American Lung Association in Ohio said lawmakers appear more receptive this time.

"There is support," she said. "From the discussions with the administration, there is definitely something that's going to come there. ... We're getting a better feeling this year than in the past."

"People are starting to understand the public health benefits of this and, from a financial aspect, how this ties into Medicaid. So much of the Medicaid cost is tied to tobacco-related issues. This is something we really have to address, and we're starting down a much easier path this year than we have in the past."

The Altria Group, parent company to Philip Morris and other tobacco companies, argued that a hike in the state's cigarette tax would disproportionately affect lower-income Ohioans, fuel a black market, and create a long-term hole in the state's budget as it relies on taxes on a product it's discouraging people from buying.

"When you look at Ohio, the total tax paid declined 4.8 percent a year for the last 10 years," said Altria spokesman David Sutton. "You've got a tax-paid category that's been declining. So if the tax increase goes ahead, what we've seen in other states is that adult consumers shift their purchases. It would be very easy for adult tobacco consumers to shift their purchases outside the state where, aside from Michigan, the tax rates would be significantly lower."

For the first half of the current fiscal year through December, Ohio had collected $357.6 million in tobacco taxes, $7.5 million, or 2.1 percent, more than projected.

Tobacco tax increases have also been traditionally opposed by convenience store operators, for whom cigarettes are a major source of revenue.

While Mr. Kasich has wanted to use revenue from the cigarette tax to help fund income tax cuts, the anti-tobacco activists want to see at least 12 percent put into smoking prevention and cessation programs for which the state was once a national leader. Enditem