Miss. lawmakers OK 1st cigarette tax hike since 85

Published 1:13 pm Friday, May 8, 2009

Mississippi’s Legislature has approved the first cigarette tax hike in two decades, voting to raise the tax by 50 cents a pack in a bid to reap millions of dollars in new budget revenues amid the nation’s economic slump.

Gov. Haley Barbour, a former tobacco lobbyist who has had a change of heart, said Wednesday he would sign the tax increase into law.

The Senate voted 40-4 and the House 102-18 to approve the bill to boost the state’s excise tax from 18 cents to 68 cents per pack. The tax has remained unchanged since 1985 and is currently the third lowest in the country.

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Lawmakers said revenue from the tax would replenish a fund that helps lower the cost of car license tags and help pay for other state services. Barbour hasn’t said when he would sign the bill now headed to his desk.

Lawmakers struggled for years to pass a cigarette tax, but Barbour had steadfastly opposed past proposals. He switched his stance after a tax commission he formed released a study that recommended a cigarette tax.

House Ways and Means Committee Chairman Percy Watson, D-Hattiesburg, said the tax was expected to generate nearly $113 million next fiscal year.

“The economic downfall indirectly contributed to the passage of the bill by creating a need for additional revenue to address the car tag crisis,” Watson said.

Legislators in the mid-1990s created a complicated formula — based on vehicle sales — to reduce the price of license plates for cars and trucks. Because of a drop in vehicle sales, that formula is running short on money.

A portion of what’s collected from the cigarette tax is to go into the car tag fund this year. The fund will receive $27 million next fiscal year.

The bill was not without detractors.

Sen. Willie Simmons, D-Cleveland, said poor people will be disproportionately hurt by a cigarette tax hike. He called for the extra revenue generated to go to health care.

“If we are going to tax them, we ought to put this money into the area that’s going to treat them,” Simmons said.

Watson told his chamber that additional revenue from the tax would likely be directed to health care programs.

The tax vote came on the first day back at the Capitol for lawmakers after a monthlong break. Lawmakers spent the recess trying to determine how federal stimulus funds would factor into the nearly $5 billion budget for the coming fiscal year.

Speaking to lawmakers early Wednesday, Barbour said revenue estimates are more than $300 million below estimates. He recommended legislators also pass a $90 million hospital tax and consider additional taxes on tobacco products.

Without those revenue sources, Barbour said agency could be cut significantly next fiscal year even with Mississippi’s share of the stimulus.

“I think we need to do our budget with the idea that the revenue stream will not be back to normal for three or four years,” Barbour said.

Barbour has pushed for a hospital tax to be resumed for the past few years. Hospitals paid the tax for about a dozen years to help fund Medicaid, a government health program for the poor, elderly and disabled.

For every dollar Mississippi puts into Medicaid, the federal government spends about $3. Barbour said the federal match, coupled with the stimulus money, could translate into an additional $571 million for Medicaid.

House Appropriations Chairman Johnny Stringer, D-Montrose, said he didn’t think a hospital tax couldn’t pass his chamber. He also said he didn’t believe it’s needed to balance the budget.

The bill is House Bill 364.