COLUMBUS, Ohio (AP) - Gov. John Kasich’s plan to increase the tobacco tax to help fund a state income-tax cut is getting mixed reviews.
Retailers and grocers say the move will hurt their profits and cost jobs, while health groups believe the hike will help curb tobacco use.
Some anti-smoking organizations, including the American Lung Association and American Heart Association, contend the 60-cent tax hike on packs of cigarettes is not enough. They want more than double that amount.
The tobacco tax increase is part of a larger policy package announced by the governor on Tuesday that promises to reduce Ohio income taxes by 8.5 percent over the next three years, lowering the top tax rate to 4.88 percent by 2016. For a median-income couple with two kids, that’s a cumulative tax savings of about $350 from 2011 to 2016, the administration estimates.
The nearly $2.2 billion income-tax cut is paid for through a combination of tax increases on commercial activity, oil and natural gas drilling and cigarettes.
Per-pack cigarette taxes would increase 48 percent over two years, from $1.25 to $1.85 under the governor’s proposal. Other tobacco products - including electronic cigarettes, cigars and pipe tobacco - would see similar tax hikes. The measure couples those increases with $26.9 million in national tobacco settlement money for smoking cessation and prevention programs.
The House Ways and Means Committee started hearings on Kasich’s plan Wednesday afternoon, though its chairman, state Rep. Jeff McClain said the proposal could be broken into roughly 15 separate bills to be further studied by as many as 11 legislative committees.
Ohio Tax Commissioner Joe Testa said in written testimony to the panel that the tobacco-tax hike would produce about $200 million in its first year and more than $300 million in the following years to help offset the income-tax cut.
The tobacco tax would be applied for the first time to electronic cigarettes, battery-powered devices that provide users with aerosol puffs that typically contain nicotine, and sometimes flavorings like fruit, mint or chocolate.
“These tobacco taxes will absolutely help people decide to quit or not start a tobacco habit,” Testa said.
Ahead of the testimony, some groups were quick to weigh in on the tobacco-tax idea.
A business coalition of grocers, wholesalers and others said the plan puts retailers at a competitive disadvantage. The groups say the increase could amount to more than $100 million in gross profits lost, as smokers are pushed to buy tobacco online or in other states.
“Increasing the tobacco tax is not going to stop Ohioans from smoking or using tobacco products,” said Beth Wymer, executive director of the Ohio Wholesale Marketers Association, in a written statement. “They will find other ways to make their purchases. Ways that will harm Ohio businesses.”
About 23 percent of Ohio adults smoke, according to data compiled by the Centers for Disease Control and Prevention.
The state’s last cigarette tax increase was in 2005, which bumped the per-pack tax from 55 cents to $1.25.
Anti-smoking groups have called for boosting the tax by $1.50, to $2.75 a pack. They said the proposal “falls far short” of the action needed to keep kids from smoking and help smokers quit.
“Tobacco tax increases are a highly effective means of reducing smoking and other tobacco use, but the increase must be large enough to have the desired public health impact,” the American Lung Association said in a joint statement with the American Cancer Society Cancer Action Network, the Campaign for Tobacco-Free Kids and the American Heart Association.
Kasich’s cigarette tax increase could be easily undercut by tobacco industry discounts, the anti-smoking groups said.
The Ohio State Medical Association and state chapter of the American Academy of Pediatrics praised the governor’s plan.
The pediatrics group’s executive director called it “a step in the right direction.”
“While we understand the concerns by some that the tax is not high enough, we don’t want perfection to be the enemy of good,” Melissa Wervey Arnold said in a written statement.
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