State Tax Update Archive
[2003 - 2004] [2002 and Older]

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Volume 8, Issue 1

Tobacco Tax Increases in the States
More than a dozen states are considering tax increases on cigarettes and tobacco products already this year, as most state legislatures reconvene this month. Budget shortfalls and the social agendas of over-zealous politicians combine to produce numerous proposals for tax increases. The federal tax on cigarettes rose 5 cents to 39 cents per pack on January 1, 2002, and the tobacco industry has committed $206 billion over the next 25 years to compensate states for smoking-related health costs. Even so, states like Minnesota continue the relentless push to tax tobacco products. "If you don't want to pay it, don't smoke," Minnesota Governor Jesse Ventura (Ind.) said last week after proposing a 29 cent per-pack cigarette tax increase. Gov. Ventura and other state officials across the country continue to defend increasing cigarette excise taxes with predictable social policy dictum, often failing to acknowledge that their real intention is to raise revenue. State government officials in Massachusetts, Connecticut, Vermont, New Hampshire, New York, Nebraska, Oregon, Maryland, Missouri, Illinois, and Arizona have already proposed tobacco tax increases this year (USA Today, 1/13/02).

Florida House Speaker Feeney Assigns Rep. Byrd to Investigative Committee
House Speaker Tom Feeney (R) assigned his likely successor, Rep. Johnnie Byrd, to head the committee that will seek the public's reaction to Senate President John McKay's tax overhaul plan. In addition to Rep. Byrd, eight Republicans and four Democratic members of the state House will study how McKay's plan might affect the Florida economy. The plan consists of an overhaul of the 1949-era state tax system. The plan would cost taxpayers billions in exemptions but would lower the sales tax from 6% to 4%. The Florida business community has rallied against McKay's proposal, mobilizing much faster than McKay's supporters. Regarding the public forum format of Byrd's proposed committee meetings, Byrd said, "It has to be done this way, because it's a watershed issue that is so fundamental we need to listen to people. After all, this country was founded on a tax question," (St. Petersburg Times, 1/9/02).

Indiana Governor Testifies Twice for Tax Increases
Governor Frank O'Bannon (D) has testified on behalf of proposed legislation a total of four times since 1997; twice before 2002, and twice this year in support of just one bill concerning tax increases. House Bill 1004 would raise cigarette tax increases from 15.5 cents to 65.5 cents per pack, increase riverboat casino admissions taxes from $3 to $5, tap $140 million from tobacco settlement funds for Medicaid, eliminate various tax incentives for homeowners and businesses, and cut state programs. Republicans in the legislature have not proposed an alternative solution to the projected $1.3 billion state budget deficit, except to make vague references to spending cuts. Gov. O'Bannon did not specify which departments or state agencies would be cut by H.B. 1004, either. O'Bannon's plan to raise sales and income taxes to balance a new property tax assessment process (H.B. 1003) will be heard by the state House Ways and Means Committee next week (Indianapolis Star-News, 1/9/02).

West Virginia Governor Proposes Sales Tax Holiday
Governor Bob Wise (D) announced his support for a three-day tax holiday on school clothes and supplies during his state-of-the-state address 1/9/02. The tax holiday would occur on the first weekend of August and apply to items costing less than $100. Taxpayers would save at least $1 million total, every year. The Legislature may not approve the tax holiday plan, however; some legislators have expressed support for directing $1 million towards the school clothing voucher program benefiting the children of families that receive state assistance. Other legislators and taxpayer activists support the tax holiday idea because it would benefit more West Virginians that just the state assistance program, and the tax holiday could possibly boost the state economy. Ten states hold sales tax holidays at least once per year: Florida, Texas, Pennsylvania, South Carolina, Iowa, Connecticut, Maryland, Washington, North Carolina, and New York. Five states do not levy a sales tax at all: Montana, Alaska, New Hampshire, Oregon, and Delaware.

For his efforts to increase state spending in the wake of the 9/11 terrorist attacks, Hawaii Gov. Ben Cayetano (D) is named Villain of the Taxpayers for January 2002.

For supporting a tax holiday in West Virginia, Gov. Bob Wise (D) wins the Friend of the Taxpayer Award for the month of January 2002.