Cigarette tax to be tempered

Legislators are attempting to strike a balance between relieving the state’s budget crisis and supporting the home-grown tobacco industry by adjusting the state cigarette tax.

A wave of support in the Senate could result in the whittling down of Gov. Mike Easley’s proposed two-year, 45-cent increase in the tax to 25 cents.

Sens. Linda Garrou, D-Forsyth, and Kay Hagan, D-Guilford, said the legislature probably would not support a 45-cent hike. Both legislators are from the tobacco-heavy Triad region.

“The General Assembly no doubt feels some cross pressure here,” said Ferrel Guillory, director of UNC’s Program on Southern Politics, Media and Public Life.

State Health Director Leah Devlin sent legislators a letter last week arguing for the high tax increase as a public health measure.

But Guillory added that the pressure from tobacco companies and Republicans against increasing taxes weighs heavily on the General Assembly.

“Senators Garrou and Hagan are trying to find a medium that can get the majority of votes in the Senate,” Guillory said.

Hagan said she supports increasing the tax because the state is missing out on the extra revenue. North Carolina hasn’t increased the tax in decades because tobacco is a home-grown industry.

But she added that the proposed hike should be moderate.

“We definitely need to have a cigarette tax, and we need to increase the tax in North Carolina,” Hagan said. “Only about a 25-cent increase will pass.”

Guillory said that the issue is not just about health, but also what the tax can do for the state’s coffers.

“Once you raise the tax, you might as well raise it as much as you can,” he said. “Personally, I think the time is ripe for a cigarette tax increase. Legislators should go as high as they think they can go.”

Hagan said that every 1-cent increase in the tax will create $7 million of revenue for the state’s General Fund.

But Ronald Milstein, vice president and general counsel for the Lorillard Tobacco Company, said any increase in the cigarette tax would be harmful to the company.

“Prices are too high already,” he said. “It’s not fair to consumers.”

Lorillard is the nation’s third largest cigarette maker and employs 2,500 people in North Carolina. Its headquarters are in Greensboro, part of Hagan’s district.

But Guillory said tobacco companies have hiked the prices of cigarettes far more than the increase that would come with an additional tax.

“It’s not likely that one more tax increase in one state will substantially affect profitability,” he said.

Milstein said that the state is dependent on home-grown tobacco and that the government should treat tobacco companies with deference.

“There’s no sense in taxing smokers to balance the budget,” he said. “The tax is ill-advised. To tax us and the smokers of the state is not the right approach.”

The N.C. Department of Health and Human Services is looking for a 50-cent tax on cigarettes to help reduce smoking and to help the state economy, said department spokeswoman Debbie Crane.

The cigarette tax is 5 cents, the second lowest in the country, and would become 50 cents if Easley’s plan became law.

Crane said that if the tax is 50 cents, the number of youth smokers could be reduced by more than 9 percent.

Also at that tax level, she said, about 60,900 juveniles would never start smoking, and an estimated 33,900 adults would quit.

“If we keep things as they are without the tax, around 20,000 youths will die premature deaths,” she said.

She said the higher tax would decrease the number of smokers because the habit would be cost-prohibitive.

“It’s a bigger issue for kids because they have less money,” Crane said. “It’s more dramatically effective.”

Crane also said a 50-cent tax would help decrease the state’s high tobacco-related health costs — now totaling $2 billion, with $600 million of that coming as Medicaid costs.

“It’s a public health issue that will help reduce the budget.”

Contact the State & National Editor at stntdesk@unc.edu.