Aug. 26, 2009

Tobacco Tax Gaining Legislative Support

The appetite to raise taxes seems to be growing as the Utah Legislature prepares for an anticipated $700 million budget shortfall. This is especially true for the tobacco tax proposed by Davis County Republican Representative Paul Ray.

“I do not support any type of tax increase normally, but again, this is a tax where the tobacco companies are making billions of dollars off of people — they’re killing people. You know, they’re using blood money, basically,” Ray says. “But yet, the state, this is the only way we have to recoup the money that we’re paying for health care for smokers and so to me it’s a legitimate way to do that.”

Ray’s proposal would nearly double the sales tax on a pack of cigarettes from 69.5 cents to $1.31. Then it would automatically re-set the tax at one cent above the national average, which Ray believes is fitting because Utah doesn’t have many smokers.

Ray says there was enough support to pass his tax increase earlier this year, but legislative leadership wanted to save it as an option for next year. There’s also talk of raising other taxes, including the gas tax and the income tax. But Senate President Michael Waddoups says the tobacco tax increase is the most likely to pass.

“I think there’s a number of revenue sources that need to be looked at,” Waddoups says. “The easy one is the tobacco tax that was discussed last year in my body. I wouldn’t say it was unanimous, but I think it is going to be the easiest one to pass.”

State leaders cut a billion dollars from the budget last year, but about 40 percent of that was restored by federal stimulus money. Without that federal assistance coming in next year, lawmakers might tap up to half of the state’s $420 million Rainy Day Fund.

Lawmakers eye $100 million tax hike

 Utah lawmakers are mulling over a $100 million tax increase and tapping into the state's rainy day fund. 
The discussions come along with a new assessment on the state's revenue situation. The latest numbers indicate Utah will have a $700 million budget shortfall by the time the Legislature convenes in January. That's after lawmakers have already made cuts in the neighborhood of a billion dollars, according to Speaker of the House David Clark. 
The Santa Clara republican told KSL News lawmakers are currently weighing all of their options, not just a tax increase or rainy day fund. 
"We didn't use our rainy day fund last session. We kept much of it aside," Clark said. "We anticipate using, including the $100 million we set aside for education, [a total of] about $300 million of that solution." 
Clark says even after that, Utah would still need to find another $300 million to cut somewhere.
"The equation is you either have to have more revenue coming in--that means taxes--or you have to make sure that you cut your spending," he said. 
One possibility: a hike in Utah's tobacco tax. A proposed bill would almost double it to about $1.30 per pack of cigarettes. That could raise $30 million. 
The top leader in the Utah Senate says he thinks state senators do support a tobacco tax increase. He calls it a slam dunk. 
Other options include an increase in the gasoline tax or re-establishing some of the state sales tax on unprepared food. 
Gov. Gary Herbert says he aims to first find efficiencies in government to help make up for the shortfall then possibly look for cuts. 
"I'm concerned about any kind of tax increase," Herbert said. "Philosophically, I believe that tax increases dampen the opportunity for the economy to grow. And right now, with the economy just being flat at best, another burden in the form of a tax increase probably ends up being counterproductive." 
But advocates for children say raising taxes is a good idea. 
But let's make sure that those taxes do not hurt low-income people who are already suffering most in this recession," said Allison Rowland, budged and research director for Voices of Utah Children. 
No decisions have been made yet, and they won't be before the legislative session that begins in January. However, the discussions going on now mark the first time lawmakers have put a dollar figure on possible tax increases.

Aug. 21, 2009

Some smokers start growing tobacco

RICHMOND — Something unusual is cropping up alongside the tomatoes, eggplant and okra in Scott Byars' vegetable garden — the elephantine leaves of 30 tobacco plants.
Driven largely by ever-rising tobacco prices, he's among a growing number of smokers who have turned to their green thumbs to cultivate tobacco plants to blend their own cigarettes, cigars and chew. Byars normally pays $5 for a five-pack of cigars and $3 for a tin of snuff; the seed cost him $9.
"I want to get to where I don't have to go to the store and buy tobacco, but I'll just be able to supply my own from one year to the next," Byars said.
In urban lots and on rural acres, smokers and smokeless tobacco users are planting Virginia Gold, Goose Creek Red, Yellow Twist Bud and dozens of other tobacco varieties.
Although most people still buy from big tobacco, the movement took off in April when the tax on cigarettes went up 62 cents to $1.01 a pack. Large tax increases were also imposed on other tobacco products, and tobacco companies upped prices even more to compensate for lost sales.
Some seed suppliers have reported a tenfold increase in sales as some of the country's 43.3 million smokers look for a cheaper way to get their nicotine fix in a down economy. Cigarettes cost an average of $4.35 a pack, home growers can make that amount for about 30 cents.
It's the latest do-it-yourself movement as others repair their own cars, swap used clothes and cancel yard work services to save money.
"Cigarette smokers say, 'Yeah, we're going to die of cancer, but do we have to die of poverty as well?'" said Jack Basharan, who operates The Tobacco Seed Co. Ltd. in Essex, England. Virtually all of his increased tobacco seed sales have been in the U.S., he said.Provided the tobacco isn't sold or traded, the Food and Drug Administration doesn't regulate homegrown tobacco. Most people grow for cigarettes, but some blend their own cigars and chew.
A grower who purchased one of Johnson's Oriental and Turkish blends for $24.50 could satisfy a pack-a-day habit for more than three years, according to Johnson's calculations.
However, growing and processing tobacco can challenge even the best gardeners. The nearly microscopic seeds must initially be grown inside and transplanted after the threat of frost has passed.
The plants are susceptible to an army of pests; must be topped, or pruned, to encourage leaf growth; require rotating every few years; and require the proper chemical soil balance. The leaves must be cut and hung to dry.
A seed started in March can be ready to smoke as soon as October. Some anxious growers have been known to microwave leaves to hasten the drying. For purists, the leaves can be cured, or aged, like a fine wine for up to three years.
"It's actually very labor intensive," said Ed Baker, general manager of Cross Creek Seed Inc. in Raeford, N.C., the No. 1 tobacco seed supplier in the U.S. "There's a reason why cigarette companies make all that money. If it was that easy, everyone would be growing their own tobacco."
Cross Creek has seen a big increase in seed requests from home growers but it sells in volume. It's smallest seed offering is 90,000 seeds for $170.
Novices and veterans can find smoker-friendly havens like howtogrowtobacco.com, a Web site that offers growing and curing tips, often including angry posts over ever-increasing taxes and smoking restrictions.
Arthur Skora, 42, records his success growing and curing in Greenwood, Wis., on a how-to DVD he sells online.
"Most of the people who are ordering are just getting fed up with prices and basically they're not going to take it anymore," Skora said.
Saving money wasn't the only motivation for Matt Schoell-Schafer, a landscape architect in Kansas City, who has 50 plants growing in his urban garden.
"It's not being a victim to their manipulation of this product," said Schoell-Schafer, 34, who enjoys an occasional cigar or cigarette. "So I'm sort of liberating myself by growing it myself."