Excise Taxes

National

SMOKE2U:  Tobacco sales take off in cyberspace
A report from the Center for Public Integrity highlights the threat of untaxed online cigarette sales from Indian reservations. Although 17,000 residents live on New York reservations, tribes sold 6.4 billion cigarettes in 2007. The Supreme Court has ruled that states can collect taxes on tobacco sales to non-natives, and New York’s cigarette tax is among the highest in the country, yet New York governors have not enforced this policy since a violent protest in 1997 by the Seneca tribe. The online cigarette trade appears to be booming; the number of online retailers selling cigarettes to the U.S. increased from 88 in 2000 to 772 in 2006. While some of these online retailers are based in low-tax states or sell duty-free cigarettes from overseas, two thirds of online retailers had apparent links to Indian reservations as of 2005. A 2003 study found that 95% of Seneca sales were conducted online or by telephone, while 5% were conducted in shops on reservations. Despite the considerable volume of sales, cracking down on the online trade has been complicated by the fact that finding a physical location for online retailers can be difficult, and online operations can be set up or dismantled quickly. Find out more here.

U.S. House approves SCHIP expansion hiking tobacco, cigarette taxes
The U.S. House of Representatives just passed a bill that would raise federal taxes on cigarettes, cigars, rolling papers and other tobacco products. The increase would raise cigarette taxes by 61 cents a pack with the additional money used to fund the expansion of the State Children’s Health Insurance Program. The increase has been criticized by some economists who believe that since tobacco tax increases result in a decrease in smoking, they actually cause a decline in tobacco tax revenue. This raises concerns about using these funds to expand the SCHIP program. If the bill passes in the Senate, it is expected to be passed by President Barack Obama. Click here to read more.

GA GOP lawmaker calls for tobacco tax increase (GA)
Representative Ron Stephens, a Republican lawmaker from Savannah, is proposing a $1 a pack increase in Georgia’s current 37 cent a pack cigarette tax. Georgia currently ranks 43rd in the nation lagging well behind the $1.17 a pack national average. Governor Sonny Purdue has expressed reluctance in increasing taxes to help the budget gap and has ordered state agencies to cut their budgets by 8%. Opponents say that the last cigarette tax increase in Georgia in 2003 has not brought in the projected revenues. Click here to read more

Businesses rally against cigarette tax hike (KY)
Kentucky Governor Steve Beshear is proposing a 70 cent increase in the state’s cigarette tax. The current tax is only 30 cents per pack with Kentucky ranking 47th out of 50 states but huge opposition from lawmakers and local businesses is expected. The low cigarette tax is significantly less than bordering states Ohio and Indiana which puts the retail tobacco dealers at a huge advantage. Proponents for the bill say the increase would bring in revenue and encourage smokers to quit, saving money in the long run; but opponents say that even the best estimates of revenue from the tax hike would only bring in a fraction of the states shortfall. Click here for the full story.

Kaine details budget plans (VA)
Virginia Governor Timothy Kaine recently detailed his budget proposal, which includes a cigarette tax increase. To fill a $2.9 billion shortfall, he has proposed increasing the state cigarette tax from 30 cents to 60 cents per pack. Kaine claims that the revenues from the cigarette tax increase could offset the rising Medicaid costs. Opponents of the tax increase believe that it would unfairly affect Philip Morris, the tobacco giant based out of Richmond. Read more here.

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