Miss. legislators look for ‘classic compromise’ on cigarette levy

January 30, 2009



JACKSON -- Mississippi House and Senate negotiators will try to reach a compromise on how high to raise the state''s cigarette tax and what this new generation of revenue should be for to help ease the state''s financial agony. 




The state Senate voted 42-7 Thursday for a bill to make the cigarette tax 49 cents a pack, up from the current 18 cents. This came two weeks after the House adopted its legislation to increase the tax to $1. 




Lawmakers expect to work out a final legislative deal to make the tax somewhat higher than the Senate version but lower than what the House initiated. 




"We will have a response to reach a classic compromise between 49 cents and a dollar," said House Majority Leader Tyrone Ellis, D-Starkville. 




Legislators are weary of the cigarette tax-increase debate -- which has hounded them for years -- and want a consensus enacted into law, said Rep. Jeff Smith, D-Columbus. 




"We''re obviously going to raise the cigarette tax. I wish we could pass it and get it over with," said Smith, who filed a bill earlier this month to increase the tax to 56 cents. 




Mississippi''s 18-cents-a-pack tax -- which has been the same since 1985 -- is the third-lowest rate of the 50 states, behind only Missouri and South Carolina, according to the Federation of Tax Administrators. 




Extra revenue needed 




Estimated to generate anywhere from about $70 million to more than $200 million a year, higher cigarette taxes are seen by Mississippi legislators as an easy way to get more money for state government''s revenue-short budget and to also discourage smoking. 




The Republican-run Senate wants some of the tax increase to spawn extra revenue to replenish the state''s cash-starved car-tag reduction fund to ensure property taxes don''t go up. 




A slump in automobile sales has caused the car tag-reduction fund to run low, prompting concerns that property taxes on vehicles could soar to offset this shortfall. The fund -- which gets its money from the state tax on auto purchases -- enables local governments to provide the state-mandated discount on automobile tags without cities and counties losing revenue. 




A projected $30 million deficit in the fund presents lawmakers the dilemma of seeing car-tag prices go up or local governments being denied reimbursement funds and raising other taxes. 




"This legislation will enable counties to avoid a tax increase on cars, homes and businesses. As the legislative process continues, we will keep in mind the tax burden that every Mississippian bears," said Lt. Gov. Phil Bryant, the Senate''s Republican president. 




The Senate on Thursday specified $25 million of the newfound revenue go to the car-tag reduction fund. 




''It ain''t going to be a dollar'' 




The Democratic-dominated House has approved legislation to use the cigarette tax revenue for restoring funds cut from elementary and secondary schools. However, leaders say they also want to find money for averting higher car-tag prices. 




"We''re open to that," Ellis said. 




Republican Gov. Haley Barbour wants the Legislature to increase the cigarette tax to 42 cents a pack and 43 cents more for discount brands. However, he has discouraged its revenue being earmarked for specific expenditures. 




The Senate voted 27-23 against an alternative proposal offered Thursday to increase the cigarette tax to $1. 




Senate Fees and Salaries Chairman Terry Brown, R-Columbus, spoke up on the Senate floor against this proposal. 




"We''re going to have a cigarette tax increase, but it ain''t going to be a dollar," Brown said. 




He voted against the 49-cents tax Thursday but said he might support it if assured its revenue would be used to keep car taxes from going up. 




"I''m not going home with the car tags being out of whack," he said. 




The state Legislature is scheduled to end its annual session in early April, but the bill calls for the cigarette tax increase to take effect before then. 




Federal tax also on rise 




The U.S. Congress is also on track to raise the federal cigarette tax to $1 a pack, an increase of 61 cents. The U.S. House and Senate have passed different bills that would use the higher tax to help pay for the State Children''s Health Insurance Program, which covers families earning too much to qualify for Medicaid but not enough to afford private insurance. 




The Mississippi Senate on Thursday by coincidence voted to raise the state''s cigarette tax to 49 cents the same day as the U.S. Senate voted to raise the federal cigarette tax to $1. Also coincidentally, the Mississippi House of Representatives on Jan. 14 passed its state cigarette-tax bill the same day the U.S. House voted to raise the federal tax. 




If both the higher state and federal cigarette taxes are enacted into law, the total price of cigarettes in Mississippi could increase to about $5 a pack. The average price of cigarettes in Mississippi is currently about $3.55 a pack, according to the Communities for a Clean Bill of Health organization, which is pushing for the tax increase. 




To read bills, follow their progress and see how legislators voted, go to the Mississippi Legislature''s Web site: billstatus.ls.state.ms.us. The Web site also has live videocasts of House and Senate floor sessions.