About 77 percent of Ohioans don’t smoke.
So if the income-tax cut Gov. John Kasich unveils on Tuesday is paid for in part by a significant increase in the state’s cigarette tax, as expected, roughly three-quarters of Ohioans probably would support it.
But what about the 23 percent who smoke?
“There are certain activities we all do in life that if we do them, you know there is going to be increased costs. This is one of them,” said state Rep. Jeff McClain, R-Upper Sandusky, who will carry Kasich’s legislative agenda in the House, including the tax plan.
The Dispatch reported yesterday that a framework has emerged for Kasich to pay for an income-tax cut that would reduce Ohio’s top rate below 5 percent. It includes potentially increasing the state’s $1.25 tax on a pack of cigarettes, raising the state’s primary tax on businesses and implementing a severance tax on shale oil and gas drillers.
Neither Kasich nor his team has confirmed what’s in the plan. But revenue boosters such as those could draw opposition from the state legislators and key supporters who back the idea of lowering the income tax but don’t like the method of paying for it — even though most Ohioans don’t smoke and the cigarette tax has not been increased since 2005.
Ohio businesses selling tobacco, especially in communities near the state line, fear losing customers.
Also, the overwhelming majority of data show that most of Ohio’s smokers are poor. They pay little or no income tax, so they would pay more for their smokes but benefit little from the proposed income-tax cut.
“It’s bad news for poor people, that’s for sure,” said Jack Frech, director of the Athens County Department of Job and Family Services, which is in one of Ohio’s poorest areas. “Let me say, no one should be smoking cigarettes. It’s unhealthy, and no one should smoke. But poor people are not going to be able to turn on a dime and stop smoking because (the state) raises the prices.”
The state brings in more than $770 million a year from its cigarette tax. Boosting that tax by $1 per pack, as some sources have indicated Kasich might propose, would generate an extra $450 million in revenue in the first year and $344 million in the second, according to figures provided by the Ohio Department of Taxation. The first year would provide more because the existing cigarette inventory would be subject to a one-time tax.
Ohio’s cigarette-tax rate is the 29th-most expensive in the U.S. The American Lung Association gives Ohio’s cigarette tax a “D” grade, and experts say raising the price of cigarettes is one of the most effective ways to get people to quit smoking or prevent them from starting the habit.
Weaning people off smoking might sound counterintuitive if a tax cut was structured in part on revenue generated from cigarette sales. But during his State of the State speech last month, the governor pledged about $35 million for smoking cessation and enforcement of Ohio’s statewide smoking ban.
“Ideally, the money generated from a higher tax would be invested back into cessation programs to help people quit,” said Micah Berman, assistant professor of public health and law at Ohio State University. “If you are increasing the tax, that is going to increase the number of people who want to quit and try to quit, so you would want to have the resources available to help them.”
Ohio last raised its cigarette tax in 2005, the same year it began to implement the commercial-activity tax on businesses’ gross receipts. Nine years later, Kasich might propose not only an increase in the cigarette tax but also a small increase in the commercial-activity tax; that could draw the ire of the business community.
Beth Wymer of the Ohio Wholesale Marketers Association said her members would have concerns if either tax is raised to fund an income-tax cut. She said that a higher tax on cigarettes could mean a loss of customers to other states. Michigan and Pennsylvania have a higher cigarette tax than Ohio, but should Ohio’s tax rise by $1 per pack, it would be higher than that of all the state’s neighbors.
“When retailers start losing business to other states, it’s not just cigarettes,” Wymer said. “ It’s the bag of chips, the six-pack of beer, pop — even motor fuel. Then that hurts not only the retailer, but the wholesaler, too.”
Joe Vardon - The Columbus Dispatch, Ohio (MCT). Dispatch Reporter Jim Siegel contributed to this story.
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