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.