Tax plan would target Vt. smokers
MONTPELIER — Public health advocates say they’ve discovered a cure-all for lawmakers’ revenue problems.
Increasing the excise tax on cigarettes by $1.25 per pack, a coalition of organizations said Wednesday, will not only close the budget gap and save $116 million in avoided health care costs, but also will win legislators points with voters back home.
The groups pointed to a poll released Wednesday that indicates 74 percent of registered voters favor the tax increase, which would raise an estimated $16 million next year. Most crucially, according to members of the coalition, the tax hike would compel more than 3,000 adult smokers to kick the habit, and prevent another 3,000 children from ever picking it up.
“It’s not just a win-win in that you save lives and raise money,” said Kevin O’Flaherty, the Northeast’s regional advocacy director of the Campaign for Tobacco-Free Kids. “But it’s win-win-win in that you can do both of those things with significant voter support.”
The hard sell from anti-tobacco advocates, who convened a Statehouse news conference Wednesday, comes as the Senate Committee on Finance makes revisions to a House tax bill that already includes a 50-cent per-pack increase in the cigarette tax.
While that’s a “great start,” said Rebecca Ryan, director of health education and public policy at the American Lung Association, “it’s not enough to impact public health.”
Ryan said lawmakers will need to raise the retail price of cigarettes by at least 10 percent to have a measurable impact on smoking rates in Vermont. With prices at about $8 per pack, she said, the coalition wouldn’t support an increase of anything less than 80 cents. But she said that the higher the tax increase, the more smokers will call it quits.
“Significant cigarette tax increases are the single most effective way to reduce smoking across the entire population, but especially among youth,” O’Flaherty said.
The proposal faces stiff opposition from retailers, especially those competing for business along Vermont’s border with New Hampshire, where cigarette taxes are already about a dollar lower than they are in Vermont.
At $2.62 per pack in state excise taxes, Vermont assesses the eighth-highest cigarette surcharge in the country.
“The reality is that increased taxes in a state like Vermont, which is very small, will just drives sales to surrounding states or on the Internet,” said Jim Harrison, head of the Vermont Grocers Association.
Val Louras, owner of Sam Frank, a tobacco distributor in Rutland, said that while Vermont may rank high in cigarette taxes nationally, it’s become a haven for smokers in New York and Massachusetts, which have the first- and second-highest per-pack rates in the nation, respectively.
Louras said many of the retailers she supplies enjoy a cross-border revenue surge as a result.
“And if you went up by a dollar, you’d pretty much get rid of any of the incentive that’s bringing that business into this state,” Louras said.
Anti-tobacco advocates dismiss the tax-flight theory as a canard. They point to a study by the Institute for Health Research and Policy at the University of Illinois at Chicago, which tracked smoking rates in Vermont alongside increases in excise taxes on tobacco.
Between 1995 and 2010, the study found, state excise taxes ramped up from 20 cents per pack to $2.62 per pack. Over the same time period, according to the analysis, smoking rates among adults went from 22.1 percent to 15.4 percent.
The more than 30 percent reduction is proof, advocates of the tax say, that smokers aren’t dodging the higher prices by driving east, but cutting out their intake altogether.
Administration Secretary Jeb Spaulding said the proposal amounts to a sales tax increase, and would therefore violate Gov. Peter Shumlin’s pledge not to raise broad-based taxes.
The Senate Committee on Health and Welfare formally endorsed a $1 per-pack increase in the cigarette tax Tuesday, and urged its budget committee down the hall to use $1 million of the revenue it would raise to subsidize health insurance costs for lower-income Vermonters.
Sen. Tim Ashe, chairman of the Senate Committee on Finance, said his committee hasn’t made any decisions yet on any aspects of the tax bill. But if the Senate does opt for the heightened cigarette tax, Ashe said, it will be for public health reasons — not to raise revenues.
“I don’t think we should look at the current financial problem the state ... faces and say, ‘let’s have cigarette smokers fix it.’ That’s just not an appropriate way to use tax policy,” Ashe said. “I can’t imagine doing it unless the Senate believed it was a priority to reduce smoking rates.”
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