Paying more to puff? TN Legislature may hike cigarette taxes
By Chris Butler | Tennessee Watchdog
NASHVILLE — Hey Tennessee smokers, state Rep. Gary Odom, D-Nashville, wants you to pay an additional 44-cent tax on each pack of cigarettes to help fund Medicaid expansion.
Are you willing to pay the extra tax, or might you drive across state lines to light up?
This proposed tax is on top of the 62 cents a pack you’re currently paying, according to his newly proposed legislation. That’s on top of $1.01 in federal taxes per pack.
Odom believes the extra tax revenue will bring in an extra $175 million a year, which will go to expand TennCare, the state’s version of Medicaid, under Obamacare.
Justin Owen, president of the Nashville-based Beacon Center, a free-market think tank, believes the plan is nonsensical.
Gary Odom
“Now we want to raise taxes even more and try to fund a program that is, in itself, unsustainable? It doesn’t really make fiscal sense,” Owen said. “Because Tennessee is situated geographically the way that it is, everyone is within an hour and a half at most from another state.”
Eight states border Tennessee, and most of them have lower cigarette taxes. Only Arkansas and Mississippi charge more.
“So it would be very easy for people to go buy cigarettes in other states and pay their taxes and leave us with a deficit to pay for the expansion of a Medicaid program that we just can’t afford,” Owen told Tennessee Watchdog.
Odom didn’t respond to Tennessee Watchdog’s messages requesting comment before publication time.
He told Gannett newspapers, however, the money is “more than enough to offset the state’s eventual share of TennCare expansion, while also taking aim at the harmful effects of smoking.”
Owen told Tennessee Watchdog that Odom’s proposal, in that context, makes little sense.
“It’s illogical to raise taxes to pay for something while also pushing to get less of what you’re taxing. You’re certainly going to wind up in a fiscal trap,” Owen said.
According to the Federation of Tax Administrators, Tennessee currently has the 12th lowest cigarette tax in the nation.
The Republican-led General Assembly is skeptical of plans to expand TennCare under Obamacare. Many legislators say they worry about the extra money they would eventually have to start paying at the state level, which Gannett reports as $170 million per year.
The eight states that border Tennessee currently charge the following cigarette taxes:
- Alabama: 42.5 cents a pack
- Arkansas: 115 cents per pack
- Georgia: 37 cents per pack
- Kentucky: 60 cents a pack
- Mississippi 68 cents a pack
- Missouri: 17 cents a pack
- North Carolina: 45 cents a pack
- Virginia: 30 cents a pack.
Even if Tennessee lawmakers were to increase the cigarette tax, it would still fall below the national average among states of $1.53 per pack. Connecticut, for instance, charges a tax of $3.40 per pack, while New York State charges $4.35.
The highest combined state-local tax rate is $6.16 in Chicago, with New York City second at $5.85 per pack, according to the Campaign for Tobacco-Free Kids.
“People will get cigarettes the cheapest way they possibly can,” Owen said.
“There’s a significant black market for cigarettes. By raising taxes, particularly significantly above what other bordering states are situated at, you’re going to end up driving up that black market and that just means more problems for law enforcement and fewer tax revenues for the state.”
Contact Christopher Butler at chris@tennesseewatchdog.org. or follow him and submit story ideas on his official Facebook page.
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