Miss. House kills effort to increase cigarette tax — for now

Published 5:44 pm Friday, May 30, 2008

The Democratic-led Mississippi House fell short Thursday night in an effort to inject cigarette and liquor taxes into a complicated formula to shore up the anemic Medicaid budget.

The chamber killed a bill that included a 1 percent sales tax on wine and hard liquor and an increase of 82 cents in cigarette excise taxes. The bill failed 55-53, falling 10 votes short of the 65 needed for a three-fifths majority.

The attempt to add “sin taxes” directly contradicts the wishes of Republican Gov. Haley Barbour, who wants to rely strictly on a revamped set of hospital taxes to plug a $90 million hole in Medicaid, a health program for the needy.

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The bill has been held for the possibility of more debate, but it appears more likely House leadership will change strategies and try to pass a bill that would move cash from the state’s rainy day fund into Medicaid. Passing that bill would take only a simple majority.

The rainy day fund provides a financial cushion for the state and Barbour has been boasting that the fund is full for the year that starts July 1.

Rep. George Flaggs, D-Vicksburg, said lawmakers can’t justify increasing taxes that he believes might be passed on to privately insured hospital patients, then “leave the big ol’ killers alone,” referring to tobacco companies.

The liquor tax was added to the Medicaid bill Thursday by one committee, taken out by another and then put back in during debate on the House floor. All that happened before the bill itself failed.

Rep. Tommy Reynolds, D-Charleston, said Barbour’s plan would force hospitals to pass higher costs on to patients.

“Haven’t we reached a new level when we have a ‘sick tax’ to fund government?” Reynolds asked.

Legislators are in the second week of a special session, and it’s not clear whether the House even has the legal authority to bring cigarette taxes up for debate.

The governor controls the special session agenda and he did not include those taxes on the list of items for lawmakers to consider.

Democrat Dirk Dedeaux, of Perkinston, the chairman of the House Medicaid Committee, said staff attorneys researched the question and told him the governor can create a list of issues but cannot tell lawmakers how to handle them. Dedeaux believes that opens the way for consideration of cigarette taxes.

The cigarette tax is a volatile issue.

At 18 cents a pack, Mississippi’s current cigarette excise tax is one of the lowest in the nation. Health advocates have been pushing for an increase for several years in hopes of reducing smoking.

Before winning the governorship in 2003, Barbour was a high-profile Washington lobbyist whose client list included tobacco companies. He has long said that he opposes a cigarette tax increase because he doesn’t want the government to take more money from anybody.

The governor also has appointed a private commission to study the state’s tax structure and that group could recommend some changes — up or down — when it releases a report late in the summer.

The $90 million Medicaid hole is for the coming budget year. It’s not unusual for the program to be in this position. Lawmakers point out that just in the past several years, Medicaid had a $270 million shortfall at one point, and legislators took care of the problem several months after the budget year started.

Under the Medicaid plan Barbour and the Mississippi Hospital Association revealed to lawmakers this week, hospitals would have to pay a single new tax to replace three old taxes. The new tax would be based on days of patient care a hospital provides. One person in a hospital for five days would count as five patient care days. One of the taxes under the old formula was a bed tax, and a hospital would pay a daily tax regardless of whether a patient was in the bed.

The governor said for every $1 the hospitals put in collectively under the new plan, they would get about $6 in return.

Medicaid is paid with federal and state money. Because Mississippi is a poor state, it gets a generous federal match — for every $1 the state pays, the federal government pays nearly $4.

The federal government said several years ago that Mississippi had to stop using part of the Medicaid formula that had been in place since the early 1990s, but the state has delayed fixing the problem by using other sources, including millions of dollars the federal government sent for Medicaid after Hurricane Katrina in 2005.

The Senate voted 41-7 Wednesday to approve the governor’s proposed new plan.

House committees cut the hospital tax in half Thursday and added a cigarette excise tax increase of 82 cents — taking the total to $1 a pack.

The bills are House Bill 17 and Senate Bill 2013.