LEGISLATORS SNUFF CIGARETTE TAX HIKE

March 26, 2009

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JACKSON -- House-Senate negotiators gave up trying to reach a cigarette tax-increase compromise Wednesday night and killed the bill the Legislature passed in January to come up with much-needed revenues. 

 

While the House, Senate and governor agree a tax increase is needed, a consensus has been elusive on how much to raise the 18-cent-a-pack rate. House bargainers offered an 80-cent compromise, but senators said they won''t go above 60 cents. 

 

"It does appear that an impasse has been reached," said House Ways and Means Chairman Percy Watson, D-Hattiesburg, the chief negotiator for the House of Representatives. 

 

The result of the impasse is the loss of at least $90 million legislators have been planning to use to avert higher car taxes and help the state through its worst economic crisis in a lifetime. 

 

"That will take $90 million off the table in what is a very ugly budget," said Senate Appropriations Chairman Alan Nunnelee, R-Tupelo. 

 

House-Senate tax negotiators met and threw in the towel 10 minutes before the Legislature''s self-imposed 8 p.m. deadline to have an agreement ready for the House and Senate to vote on this week.  

 

House Bill 364 would''ve raised the state''s cigarette tax for the first time since 1985. 

 

Legislators expressed some hope they can eventually reach an agreement on raising the cigarette tax as they take more time to work out a budget in the next couple of months. However, it''ll require 67 percent of the Legislature''s 174 members to bring the dead bill back.  

 

"I don''t think there will be enough votes to revive it," said House Public Health Chairman Steve Holland, D-Plantersville. "But, until the white flag is raised in total defeat, nothing is dead around here." 

 

The House and Senate agreed Wednesday to extend their annual session beyond the original April 4 adjournment date to give lawmakers more time to get a handle on how they can spend the federal economic-stimulus funds Mississippi is getting. They plan to recess next week and return in May to consider passing the $18 billion budget to fund state government.  

 

In trying to reach a cigarette-tax compromise with the Senate, House leaders on Wednesday proposed setting it at 80 cents a pack -- down from the $1 the House approved in the original bill that passed in January on an 81-39 vote. 

 

Watson had earlier this week agreed to go down to 90 cents, which would generate an estimated $165 million a year for the state treasury. 

 

Senators countered this week with an offer of 60 cents a pack -- up from the 49 cents the Senate voted 42-7 for two months ago. The 60-cent tax would generate about $94 million a year, according to Mississippi State Tax Commission estimates. 

 

House and Senate negotiators have been planning to use $23 million of the new tax revenues to help ensure car taxes don''t go up. The state''s car tag reduction fund is running dry and needs more money because of a slump in auto sales. The fund -- which gets revenues from the state tax on auto sales -- enables local governments provide car owners a discount on their automobile tags. 

 

Republican Lt. Gov. Phil Bryant -- who heads the Senate -- said lawmakers will continue to seek ways to preserve that discount. 

 

"I am committed to doing everything in my ability to prevent Mississippians'' car tags from more than doubling this coming year. In these tough economic times, this is one more burden that Mississippians should not have to bear," Bryant said in a statement he issued Wednesday night. 

 

"It is unfortunate that the House conferees chose to walk away from a real solution to a looming problem facing Mississippians. The Senate has made good faith efforts to reach an agreement on this important issue before us." 

 

Watson has been stressing that the state "desperately" needs the millions of dollars the cigarette tax increase can generate, but he said he''s willing to walk away from that money if the Senate refuses to go above 60 cents. He said that amount falls short of what''s needed to curb smoking and generate enough revenues 

 

He said the House also negotiated "in good faith" by agreeing to reduce its original $1 rate by 20 cents, but the Senate only agreed to increase its earlier 49-cent proposal by 11 cents. 

 

Bryant said the Senate is not willing to go above 60 cents because it would be too much higher than the tax rates for surrounding states. It''s 42 cents in Alabama, 62 cents in Tennessee, $1.15 in Arkansas and 36 cents in Louisiana. However, some states are considering raising their cigarette taxes. 

 

Mississippi''s 18-cent cigarette tax is the third-lowest rate among the 50 states, according to the Federation of Tax Administrators. The average of the 50 states is $1.21. 

 

The Mississippi House and Senate agreed in 2006 to raise the tax to $1, but Gov. Haley Barbour vetoed it. He says he now supports raising it to 42 cents. 

 

The federal cigarette tax is increasing next Wednesday from 39 cents a pack to $1.01. 

 

The average price of cigarettes in Mississippi now is about $3.55 a pack, according to the Communities for a Clean Bill of Health, a coalition of organizations pushing for the state cigarette tax going up to $1.