House Panel Rejects Bill To Hike Tax On Cigarettes

Virginia Gov. Timothy M. Kaine (D) is seeking to raise $148 million to fund Medicaid.
Virginia Gov. Timothy M. Kaine (D) is seeking to raise $148 million to fund Medicaid. (Scott K. Brown - AP)
  Enlarge Photo    
By Anita Kumar
Washington Post Staff Writer
Thursday, January 29, 2009

RICHMOND, Jan. 28 -- A Virginia House of Delegates subcommittee defeated a proposal by Gov. Timothy M. Kaine (D) to double the tax on cigarettes in a state where the tobacco industry pumps millions of dollars and thousands of jobs into the economy.

The Senate will vote on an identical bill next week, leaving open the possibility that the legislature's budget negotiators could still consider the tobacco tax as a source of revenue for the state's cash-starved $77 billion, two-year budget.

If legislators reject the idea of raising the state's tax on cigarettes from 30 to 60 cents per pack, they will have to find another way to come up with $148 million to pay for Medicaid at a time when the state faces a shortfall of at least $2.9 billion.

Wednesday's 8 to 2 vote by the House Finance Committee panel was a blow to the governor, but Republicans and Democrats said they oppose raising taxes on a single industry during tight economic times, especially when that industry provides the state with so much money.

Del. James P. Massie III (R-Henrico) said he was opposed for several reasons, including wanting to protect one of the world's largest cigarette makers, Philip Morris, which in recent years has moved its headquarters to Richmond and opened a research center there.

"It violates my basic sense of fairness to . . . turn around and double the tax on them," Massie said.

Tobacco was once the foundation of Virginia's economy, and the state is still home to thousands of tobacco farms. Altria, the parent company of Philip Morris, employs more than 5,000 workers.

"We continue to believe that the tax . . . could negatively impact Virginia manufacturers and tobacco growers and retailers and the jobs that they provide," Altria spokesman Bill Phelps said.

Del. Robert H. Brink (D-Arlington), who introduced the bill on Kaine's behalf, said he did not intend to "demonize" tobacco.

"I recognize the important role of tobacco and cigarette companies in the commonwealth's economy," Brink said. "The reason I did it is I am very concerned about the effect of not enacting this increase on the state's Medicaid budget."

A second proposal, to raise the tobacco tax by 89 cents a pack to bring it up to the national average, was unanimously defeated.

The tobacco tax's future remains uncertain. Senate Majority Leader Richard L. Saslaw (D-Fairfax) supports the increase, but House Speaker William J. Howell (R-Stafford) opposes it. Both men will have considerable influence in writing the state's final budget.

Kaine's proposal would generate about $148 million a year, though that could diminish in future years if more people stopped smoking. The national average tax is $1.20 per pack. Forty-six states impose a higher tax on cigarettes than Virginia does.

"It's unfortunate they made this decision without proposing an alternative solution," said Gordon Hickey, Kaine's spokesman. "If this stands, the House is going to have to find $150 million more in Medicaid cuts, and that will certainly harm Virginia's most vulnerable residents."

If approved, a cigarette tax increase would be Virginia's second in five years. In 2004, the General Assembly raised the tax from 2.5 cents, the nation's lowest at the time, to 30 cents.

Groups representing doctors, hospitals and educators support the bill. Some cite health reasons, and others do not want their budgets cut further.

David Debiasi, who represents the American Lung Association and a coalition of more than 40 groups called Virginians for a Healthy Future, said the House missed an opportunity to help curb smoking in the state.

"It wasn't a surprise, [but] it was a disappointment," he said. "The health benefits are obvious and needed."

© 2009 The Washington Post Company