Lawmakers may target ‘small tobacco’ for more

JACKSON – If and when the Mississippi Legislature adopts a budget, smokers could take another financial hit.
During the recently adjourned 2008 regular session, the Legislature approved and Gov. Haley Barbour signed into law a 50-cent-per-pack increase on cigarettes to 68 cents. It appears budget negotiators are now considering an additional tax increase on the small cigarette-manufacturing companies.
Some call them “generic” cigarettes. House Speaker Billy McCoy, D-Rienzi, calls them “rabbit tobacco” companies, though, he admits that rabbit tobacco is a particular brand and might not be an accurate description of the companies that might be subject to an additional tax.
Barbour calls them the non-participating cigarette manufacturers or NPMs. They are the smaller companies that were not parties to the lawsuit filed in the 1990s by then-Attorney General Mike Moore against the big tobacco companies and they were not part of the ultimate settlement.
This year the governor has advocated that the smaller companies pay an additional 43 cents per pack.
“The purpose is to require them to pay in the same amount as those cigarette companies that pay Mississippi more than $100 million annually under the tobacco settlement reached in the ’90s,” Barbour said earlier this year.
In that lawsuit settlement, the companies agreed to pay the state more than $1 billion in upfront funds. Plus the companies are supposed to pay the state about $100 million a year forever, based on sales.
Since the larger companies are making the annual payments, costing them money that is passed on to consumers, it gives the small companies an unfair advantage, Barbour reasoned.

Rejected earlier
Even though Barbour advocated the additional tax on the small companies before the 2009 legislative session began, it never received serious consideration. On the final day of the session, some say it was part of a deal that House leaders thought they had worked out with the Senate.
But now as legislative leaders work to craft a budget in a special session for the rapidly approaching new fiscal year, which begins July 1, the proposal is gaining serious attention. Though nothing is final, it appears both House and Senate leaders have embraced the concept that still would have to be passed by both chambers.
Being considered is an additional 22-cent-per-pack tax on the smaller companies that would generate something less than $10 million – relatively small change in a $5 billion budget, but enough to help fill some holes that could lead to a compromise.
“It looks like a tax whose time has come,” said McCoy, who earlier this session brushed aside questions about taxing the smaller companies.
Ironically, several times in recent years, the House passed the tax on the non-participating manufacturers only to see Barbour use his influence to kill it later in the process.
But as Barbour, a former lobbyist for big tobacco who still receives payments from his former lobbying firm, voiced support for the tax, support from the House Democratic leadership waned. Barbour’s reasons for imposing the tax were almost the same echoed by national tobacco lobbyists, and the same argument House leaders used when they passed the tax multiple times in past years.

Companies not sued
Al Sage, a Jackson-based lobbyist who represents several of the companies, argues that placing an additional tax on the small manufacturers is not fair. He said the large companies were sued and agreed to a settlement. It is not fair to impose a tax on the companies that were not sued to try to recoup a pro rata share of money from them, he said.
Sage said the large companies were sued for past misdeeds and misrepresentations of their product. He pointed out most of the small companies did not exist when the lawsuit was filed.
“This is like everyone who drives a car should pay damages every time someone is found at fault in an automobile accident. It makes no sense,” Sage said, adding the tax was about “Big Tobacco and getting back their market share.”
But David Sutton, spokesman for tobacco manufacturer Altria, previously known as Phillip Morris, said part of the intent of the lawsuit settlement was to reimburse the state for continuing health care costs related to smoking. Cigarettes sold by the small companies also add health care costs to the state, he said.
Lt. Gov. Phil Bryant said, “I don’t particularly want to raise any more taxes…. But we’re at the point where we want to discuss all options. It is on the table.”
According to Sutton, the vast majority of the states impose the additional tax on the non-participating manufacturers.

Contact Bobby Harrison at (601) 353-3119 or bobby.harrison@djournal.com.

Bobby Harrison, NEMS Daily Journal Jackson Bureau