A Pennsylvania tax idea goes up in smoke

HARRISBURG - When it came to raising new sources of desperately needed revenue, stogies and chaw appeared to be the lowest-hanging fruit.
Every other state imposes excise taxes on smokeless tobacco, and all but one other - Florida - do so on cigars. And the idea was widely popular in the Keystone State, public-opinion polls showed.
So how did the ripe-for-the-picking products avoid being affected by the cornucopia of taxes that top lawmakers announced last week would balance the state budget?
Johnna Pro, press secretary for the House Majority Appropriations Committee, has a theory.
"Because the majority of people negotiating the budget are cigar-chomping men," she said. "It's sexism."
That tongue-in-cheek reasoning aside, Pennsylvania lawmakers have clearly rebuffed an idea that most agree could have generated $38 million in new tax revenue this year.
Last week, leaders of three of the four caucuses announced that they had reached a budget agreement on a $27.9 billion spending plan. They said the package provided $1.2 billion in new revenue that the state could count on for years to come, including a 25-cent-per-pack hike in the cigarette tax.
But still no tax on smokeless tobacco or cigars - a proposal that seven out of 10 Pennsylvanians support, polls have shown.
Antitobacco groups said they were stunned that the products were not included in the plan as they had been led to believe by top legislators.
"It makes zero sense," said Kevin O'Flaherty, the Northeast advocacy director for the Campaign for Tobacco Free Kids. "It's fine to raise the price of cigarettes. . . . But it increases the disparity in price between cigarettes and other tobacco products, and that encourages kids to use those products."
Already, he said, the rate of 16- to 25-year-olds in Pennsylvania using those products is twice the national average.
Senate Democrats supported taxes on cigars and smokeless tobacco, and Brett Marcy, a spokesman for House Democrats, said that caucus had supported the proposal but was unsuccessful getting Senate Republicans to sign off.
"We agree that it is a commonsense tax and a ready source of revenue," he said. "But the political realities being what they are dictated that it may not be possible this budget year.
"There was just not an appetite in the Senate Republican caucus to look at those options."
Erik Arneson, spokesman for Senate Majority Leader Dominic Pileggi (R., Delaware), said leaders dropped the cigar and smokeless-tobacco tax because of its minimal effect on closing the budget deficit.
"The amount which would be raised . . . is so relatively small that it is immaterial to producing a balanced budget," Arneson said.
Yet the parties did reach compromises on other, even smaller, budget items. For instance, they agreed to take $25 million annually from the profits of the state-run liquor-store system and use it for general government functions.
Gov. Rendell has vowed to veto the three-caucus compromise budget, arguing that it is built on "phony" and overly optimistic revenue figures that, when they don't materialize, will put the state in this very position next year. He also said the spending plan shortchanged education.
Legislative leaders from the three caucuses spent much of yesterday in closed-door talks with administration aides in hopes of ending the budget standoff. Senate Republican leaders said late yesterday that a final budget agreement could be hashed out today, setting the stage for approval by the bipartisan conference committee as early as tomorrow. The state, which began its fiscal year July 1, has been operating under a stopgap spending plan.
Rendell repeatedly has said that taxing snuff, chewing tobacco, and cigars was a no-brainer, and he has expressed frustration that the General Assembly hasn't agreed with him.
"It is a special interest that continues to be treated as special," said Gary Tuma, Rendell's press secretary. "The administration favors taxing these products as other states do. Not doing so defies logic."
The tobacco taxes also weren't in the revenue mix in another compromise plan offered by Rep. Sam Smith (R., Jefferson), the leader of House Republicans, who were not party to the three-caucus budget agreement.
"When you listen to the governor and the Democratic leaders, they are literally saying 'tax it because it is not taxed,' " said Steve Masking, Smith's spokesman. "We don't believe that something should be taxed just for the sake of taxing."
Sharon Ward, director of the Harrisburg-based Pennsylvania Budget and Policy Center, said she believed Republicans were sticking to their "no-new-tax pledge" and "listening to their inner Rush Limbaughs" when they decided to forgo the smokeless-tobacco and cigar taxes.
"It's discouraging that they would bypass a revenue idea that has virtually no impact on Pennsylvanians and minimal impact on industry," she said.