Big Tobacco touts tax on little guys

Published 12:11 am Tuesday, May 26, 2009

JACKSON. (AP) — Big Tobacco wants Little Tobacco taxed more, saying it could mean $28 million more a year for a state budget already in danger of going up in smoke.

‘‘Mississippi’s leaving money on the table,’’ said David Sutton, manager for media affairs for Altria Group, parent company of Philip Morris. ‘‘We’re hoping the Legislature will turn its attention to this.’’

Sutton said these manufacturers enjoy a price advantage because of their non-participation in the state’s 1997 tobacco settlement. Mississippi gets no health care reimbursement for those cigarettes even though they are just as unhealthy, he said.

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It costs those who did take part in the settlement about 50 cents per pack, he said. ‘‘We need to level the playing field.’’

Gov. Haley Barbour, a former lobbyist for Big Tobacco, agrees. In his budget proposal, he’s included proposed tax increases on both smokeless tobacco and cigarette manufacturers who didn’t participate in Mississippi’s tobacco settlement.

‘‘If these companies don’t pay their fair share, then Mississippi is just subsidizing cheap cigarettes and snuff,’’ Barbour said earlier this month.

Officials from several smaller tobacco companies did not return calls. Former Attorney General Mike Moore, who helped negotiate the state’s tobacco settlement, could not be reached for comment.

Altria officials want Mississippi lawmakers to take up the matter in a special session this year, but the governor’s office said it hasn’t discussed that possibility. State lawmakers have rejected similar proposals in recent years.

So far, Mississippi has received about $1.6 billion from its settlement with Big Tobacco, which refers to Philip Morris, R.J. Reynolds, British American Tobacco, Lorillard and Brown & Williamson.

Sutton said the settlement payments have been made because of past misdeeds by tobacco companies and to provide revenue in perpetuity to reimburse states for health costs related to smoking.

In contrast, Mississippi is getting no money from cigarette manufacturers that didn’t take part in the settlement. Those manufacturers now make up 10 percent of Mississippi’s market and are growing.

Altria is suggesting a 43-cent-a-pack tax hike on cigarette manufacturers who weren’t a part of the settlement – the same amount Barbour proposed. That would translate into $21 million more a year in tobacco taxes for Mississippi, Sutton said. With a three-to-one match in federal Medicaid dollars, that money could be multiplied, he said.

There’s also the matter of how Mississippi taxes moist, smokeless tobacco.

Sutton said Mississippi uses a 15-percent ad-valorem tax based on price, which means if the price is lowered, the state gets less tax money.

In March, five brands, including Copenhagen and Skoal – both of which Altria owns – reduced their prices. As a result, Mississippi will take in nearly $1 million less in tax revenue, Sutton said.

Going to a 50-cent smokeless pack tax would bring in another $7 million a year for Mississippi, he said.

‘‘That’s just been rejected for the past six sessions,’’ said Rep. Percy Watson, D-Hattiesburg, chairman of the House Ways and Means Committee. ‘‘It’s never gotten out of committee. Apparently we don’t think much of it.’’

It’s not up to Big Tobacco whether to implement these taxes, he said. ‘‘That’s something for the Legislature to decide.’’

The House previously has passed measures to increase the tax on cigarette manufacturers that didn’t take part in the settlement, Watson said.

‘‘We passed it a couple of times in the House. When something is being pushed by big companies that say it’s designed to level the playing field, it could actually be giving them a competitive advantage over smaller companies.’’

Barbour has signed a 50-cent per pack tobacco tax increase into law. That came on the heels of a federal tobacco tax increase from 39 cents to $1.01 a pack.

If lawmakers had passed this tax increase this year as well, manufacturers ‘‘would have been hit pretty hard,’’ Watson said. ‘‘We’d rather see it taken up in a regular session.’’

Cigarette use continues to decline nationally. Historically that rate has been between 2 and 3 percent, but last year that decline accelerated to 4.5 percent, Sutton said.

Some smokers may be trading in their packs of cigarettes for cans of smokeless tobacco, which is increasing annually at a level of 6 to 7 percent, he said.

‘‘We expect that to continue,’’ Sutton said.

Gwen Reeves, owner of The Country Squire in Jackson, which handles tobacco products, said most of the companies have added their shipping price to the price of their merchandise, which means the 15-percent ad valorem tax charged by the state is ‘‘taxing the tax. Some companies list the ship tax separate, which is good, but some are just including it with the price.’’

She worries what’s happening with regard to taxes being charged.

‘‘This is why this country is not as free as it used to be,’’ she said. ‘‘The government says jump and you have to jump. You have no alternative.’’

Information from: The Clarion-Ledger,