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Florida Senate panel embraces tax hike on tobacco products

TALLAHASSEE — A Senate committee ended a nearly 15-year freeze on tax hike proposals in Florida Tuesday, unanimously voting to raise the cigarette tax $1 per pack and increase the tax on cigars and smokeless tobacco $1 per ounce.

Supporters called it a historic opportunity to raise more than $870 million in new revenue, discourage smoking, and offset the state's Medicaid program that pays to treat sick smokers.

Opponents warned it would devastate Florida's hometown cigar business and kill retail jobs. They blasted the revenue projections as bogus numbers that won't realize the savings lawmakers expect.

"You can't get there from here," warned John French, lobbyist for cigarettemaker Altria, formerly Philip Morris. He predicted that Medicaid costs will not drop and that the number of smokers will not decline as expected by lawmakers. "You're basically victimized by frankly sloppy work by the people who make these numbers."

Members of the Senate Finance and Tax Committee defended the proposal, pushed by Boca Raton Democratic Sen. Ted Deutch and Melbourne Republican Thad Altman, and stood by the revenue projections.

Deutch said that while the state spends more than $1.25 billion treating Medicaid patients with tobacco-related illnesses, it collects only $431 million in tobacco taxes.

He said that while the tax hike is expected to deter some people from smoking, those who pay the new taxes will pay more of their share of the state's health care costs.

While some smokers will try to escape the tax by getting cigarettes from out of state, those who quit "will save the Medicaid budget in this state millions of dollars."

If approved, the state tax on cigarettes would go from 34 cents per pack to $1.34 a pack. Those fees would be on top of the federal excise tax hike of 62 cents a pack, which takes effect today, to pay for children's health care programs.

Gov. Charlie Crist said Tuesday he was warming to the idea of taxing cigarettes as one way to fill Florida's $3 billion budget gap, as long as it was called a user fee.

"I'm not particularly fond of any taxes; user fees may be a different item," Crist said. He added, however, that he does not support taxing cigars.

"Obviously that's an industry in Florida that has a great tradition, especially in the Tampa Bay area and probably some other parts of the state," he said. "I would like to see that removed, if possible."

Altman defended the tax on cigars, saying that unlike other states that tax them at the wholesale level, Florida will tax them by the ounce and be "more fair to Florida's cigar manufacturers, especially if they are traditional, higher-end cigars."

The Senate committee, made up of three moderate Republicans and two moderate Democrats, was the first of five committee stops in the Senate where the measure has the full support of Senate President Jeff Atwater and is expected to pass.

In the House, however, the tobacco tax hike faces long odds. Fort Lauderdale Rep. Ellyn Bogdanoff, who chairs the Finance and Tax Committee, is aggressively opposing it.

The Senate bill is supported by the American Lung Association, the American Heart Association and the American Cancer Association, the League of Women Voters, AARP, medical school deans and the Florida Association of Counties.

Opponents include the nation's largest tobacco companies, Associated Industries of Florida, retailers, cigarette distributors and convenience stores.

Jim Smith of the Petroleum Marketers Association, which represents convenience stores, said his organization opposes the measure because "it's going to impact small business." He said buyers will cross the Florida border to Georgia and Alabama to buy cheaper cigarettes or buy them over the Internet from the more than 600 sites run by Indian reservations.

"They don't need to leave the comfort of their home," he said.

Deutch said that while 1.2 million cigarettes are sold in Florida, economists calculated the lost sales when they projected the new tax will raise only $870 million. He said the price hike will most affect the age group that is price sensitive, teenagers and children.

"There are 5 million people living today who will die prematurely because they use tobacco," Deutch said. "Tobacco is absolutely a choice. The consequences of that should not be foisted upon the citizens of this state."

Tuesday's vote was the first time since 1994 and the only time since Republicans took over control of the Legislature in 1996 that a tax increase has won committee approval.

"We view this not as a tax, but as a surcharge," Altman said. "It's a historic day for Florida."

Although a cigarette tax hike has been sponsored by Deutch for two years, and pushed by Democrats and health groups for years before him, it was never even considered an option when Florida Gov. Lawton Chiles successfully sued the tobacco industry in 1994 and won a historic settlement against it in 1997.

Altman said the change of heart has come about because Senate Republican leaders want it and because there is "the growing understanding and enlightenment that this behavior is very detrimental to the people of our state."

Will Senate leadership be able to persuade the House? "Hope springs eternal," Altman said.

Staff writer Alex Leary contributed to this report. Mary Ellen Klas can be reached at meklas@MiamiHerald.com.

Florida Senate panel embraces tax hike on tobacco products 03/31/09 [Last modified: Wednesday, April 1, 2009 6:39am]

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