Anti-smoking activists want tobacco tax boost

4/2/2002

COLUMBUS - When New York struggled to fill a gaping hole in its budget last year, it turned to America's original cash crop, opting to raise its tax on a pack of cigarettes by 39 cents.

That increase, scheduled to go into effect tomorrow, will give New York the distinction of having the highest cigarette tax in the nation: $1.50. New York's tax on smokers has more than doubled in three years.

When cash-starved Ohio hungrily began eyeing the hundreds of millions of dollars pouring in from its settlement with major tobacco companies, money it had promised to anti-smoking efforts and other programs, activists against tobacco suggested that the state should instead follow New York's example.

"The great thing about increasing the cigarette tax is that it not only helps the state in its budget situation, it would benefit all of the (tobacco settlement) trust funds that are being impacted by the deficit and have an impact on the consumption of tobacco products," said Susan Jagers of the American Cancer Society in Ohio.

Health groups figure that increasing Ohio's tax of 24 cents a pack to 74 cents would raise $400 million a year while encouraging price-sensitive consumers, particularly youths, to kick the habit or not take it up.

State collections of cigarette taxes have been trailing off in recent years. Last year the state received $270.4 million, down from $274 million the year before.

But there appears to be little appetite among Ohio's legislative leaders to tax smokers further, even as it appears that the state could be $400 million more in the red by the end of the fiscal year on June 30. It is not the word "cigarette" that causes the apprehension.

"T-A-X. T-A-X. T-A-X. ... We're not going to go there," said Senate President Richard Finan (R., Evendale).

A Democrat-sponsored amendment to enact a temporary 15-cent increase failed during budget-fix talks late last year. Anti-tobacco activists are considering asking lawmakers instead to approve a resolution that would put the issue on the ballot to let voters decide, Ms. Jagers said.

Meanwhile, the General Assembly is in the process of borrowing $260 million from the tobacco settlement, giving IOUs to the anti-smoking campaign, to tobacco farmers who have experienced a drop in demand, and some health programs.

Ohio ranks 31st among the 50 states when it comes to taxing cigarette purchases - tied with Delaware and Kansas at 24 cents a pack. That is on top of the federal excise tax of 39 cents a pack.

Ohio last increased its cigarette tax in 1992, when it raised it 6 cents. At the same time, it established a separate tax on cigars, chewing tobacco, and other tobacco products at 17 percent of the wholesale price.

Ohio, where tobacco farming is limited to a handful of hilly southern counties, is in the middle of the tax pack compared with its neighbors, which range from a low of 3 cents in tobacco-producing Kentucky to a high of 75 cents in Michigan.

If Ohio increased its tax to 74 cents, it would jump to 12th, just behind Michigan, which also is talking about an increase.

Every state taxes cigarette sales to some degree, but the further removed a state is from tobacco-producing country, the higher its cigarette tax tends to be.

But while many states are eyeing tobacco as an easy way to raise money, Louisiana is going in the opposite direction. Its tax is slated to drop from 24 to 20 cents on July 1.

Ohio's tobacco farmers, while fighting the state's plan to divert their trust fund's money over the next two years, do not want the kind of help the anti-smoking activists are offering.

"It's obvious price is a sensitive matter in all products," said David White, director of commodity relations for the Ohio Farm Bureau. "After the master settlement agreement, the tobacco companies increased the price of cigarettes [to pay for the settlement] and consumption fell off. If you increase taxes and consumption falls off, what did [tobacco farmers] gain?"

The quotas of Ohio tobacco farmers, set by the tobacco industry, have dropped 60 percent since 1999.

"I don't believe any new taxes would fly right now," Mr. White said.