BOBBY HARRISON:Odds growing that cigarette taxes will rise

JACKSON – Slowly but surely the debate about whether to increase the cigarette tax has evolved.

The fight no longer is about whether to raise the cigarette tax, but about what to do with the revenue generated by the increase.

Lt. Gov. Phil Byrant wants to use the revenue – at least part of it – to offset a reduction in the state income tax.

Gov. Haley Barbour wants to use the revenue in the context of overall tax relief, and my guess is that he would go along with a reduction in the income tax.

The House leadership through the years has proposed a hike in the cigarette tax to fund a number of items. The consensus of the House leadership currently is that a cigarette tax hike would go toward Medicaid – specifically to fund a $90 million shortfall in the agency.

Former Lt. Gov. Amy Tuck was the first to propose using an increase in the cigarette tax to offset a reduction in another tax – in her case the grocery tax.

Tuck's proposal passed the Legislature on two separate occasions, but she could not garner the votes to override a Barbour veto.

At the time, Tuck was criticized for using the cigarette tax, which has been described as a declining revenue source, to offset a reduction in another tax that is a stable source of income for the state.

While Tuck was criticized for making that proposal, that is essentially what Bryant and Barbour have proposed. They just want to cut a tax other than the grocery tax.

Ironically, Barbour, a former Washington, D.C., tobacco lobbyist who has blocked an increase in the cigarette tax, now needs the revenue the tax hike will generate.

Barbour, a second-term Republican, wants to leave as part of his legacy a tax reduction. But as the state and national economies continue to spiral downward, it is becoming increasingly clear that it will be difficult to cut taxes.

Collections slowing
State revenue collections are slowing because of the poor economy. It might be difficult to trim state agency budgets enough to absorb a tax cut – especially as costs go up in the area of gasoline and other utilities.

Imagine the increased cost for the Highway Patrol to run its vehicles or for the schools to carry children to and from classes. Those are just two of the many examples of increased costs for the state.

The only way to provide a tax cut might be to offset that loss in revenue with an increase in the cigarette tax.

There could be real disagreement on what to do with that revenue.

There are many who still like Tuck's original proposal and its simplicity – reduce the nation's highest state-imposed grocery tax and offset the lost revenue by increasing the nation's third lowest cigarette tax, which by the way is now $1 below the national average.

But Bryant, Barbour and others do not want to reduce the grocery tax. They say it is a fair tax that everyone pays.

Still others want to use the additional revenue generated by a cigarette tax to enhance health care. They say that makes sense in what is by all accounts the unhealthiest state in the nation. Experts say there would be enough additional revenue to fund the current Medicaid deficit and to improve other areas of health care.

There are those who say that as the economy sours the additional revenue generated by a tobacco tax hike will be needed just to meet all of the state's current budget responsibilities.

The bottom line, though, is that at some point – the 2009 regular session at the latest – there will be a cigarette tax hike.

Right?

Not necessarily.

The issue could easily get bogged down on what to do with the additional revenue and the increase might never get put into law.

In the current political environment, that possibility is real.

Bobby Harrison is chief of the Daily Journal's Capitol bureau. Contact him at bobby.harrison@djournal.com, or call (601) 353-3119.