|State still pursues cigarette tax increase
by Mary Helen Yarborough
Despite the recent passage of a law increasing the federal cigarette
tax by 156 percent this spring, the S. C. House of Representatives has
proposed a bill that would increase the state’s cigarette tax
from its current 7-cent per pack, which is the lowest such tax of any
state in the nation.
Introduced in the House Jan. 13, House Bill (HB) 3014 would increase
the tax on tobacco products to 1.85 cents a cigarette or 37-cents per
pack (or 5 percent of the manufacturer’s product price). It also
includes a tax on all tobacco products.
The bill, sponsored by Reps. Michael A. Pitts (R-14) and Wendell
Gilliard (D-111), also would assess a 5 percent tax on the baseline
price charged by manufacturers, considering that cigarette makers have
traditionally reduced the product price to adjust for the retail
product price. HB 3014 also would tax all tobacco products including
roll-your-own cigarettes; and assesses a 5 percent tax on the base
price of each product sold. The provides that retailers, distributors
and wholesalers caught stockpiling cigarettes to avoid the higher tax
would be penalized.
The Senate, which has not proposed a cigarette tax increase this year,
would have to vote to approve the House bill; then the governor would
have to sign the final measure before it could become law. Last year,
the House and Senate approved a cigarette tax increase, but Gov. Mark
Sanford vetoed it.
Revenue generated from the cigarette tax increase would allocate
at least $10 million to the Commission on Higher Education to
underwrite nursing education through the Critical Needs Nursing
Initiative Fund. The revenue also would support the Nursing Education
Scholarship Fund, providing scholarships and financial assistance for
qualified in-state applicants.
Beginning with school year 2009-2010, the projected revenue would cover
30 credit hours, fees, books and materials for qualified individuals
seeking either an associate’s or bachelor’s degree in nursing.
Qualified individuals would include South Carolina residents who
graduated from a high school in this state, or whose parent or guardian
served in the U.S. armed forces during the previous four years and paid
income taxes in South Carolina for a majority of their service years.
“The nursing education scholarship, in combination with all other aid,
including federal, state, private, and institutional funds, must not
exceed the total cost of attendance, excluding costs for room and
board, for any academic year,” the HB 3014 states. “The nursing
education scholarship must be awarded only after all other sources of
aid have been exhausted. Adjustments to the financial aid package must
be made to reflect other sources of aid and to prevent an overage.”
The bill has been referred to the House Ways and Means Committee where
members are negotiating other possible provisions, including allowing
the new revenue to fund Medicaid. Health advocates are hoping to see
more of the tobacco tax money fund state-supported health programs that
cigarette smokers are more likely to need.
Meanwhile, President Barack Obama on Feb. 4 signed into law a federal
cigarette tax of $1.01 per pack. The new tax will go into effect April
1 and also significantly increases the tax on roll-your-own tobacco.
The new law is based upon Senate and House approval to increase the
current federal 39-cent tax per pack by 156 percent. This new national
cigarette tax extends the State Children’s Health Insurance Program
(SCHIP), which was established in 1997 to help families earning too
much money to qualify for Medicaid but not enough to afford private
insurance. The cigarette tax authorizes Congress to spend $33 billion
over the next four years to cover 11 million children under SCHIP.
Previously, Congress spent roughly $25 billion for about 7 million
children under the program.
Under SCHIP, states receive an enhanced federal match (greater than the
state’s Medicaid match) to provide this coverage. Each state is
entitled to a specific allotment of federal funds each year and allowed
three years to spend their allotments. After three years, Title XXI
provides that all remaining funds be reallocated to states that have
used up their allotments, which traditionally goes to states with large
populations, such as New York and California.
The S.C. cigarette tax would not be conditioned upon federal
restrictions, which means that other programs also could be funded.
S.C. Speaker of the House Bobby Harrell (R-114) has said that the
enactment of the federal cigarette tax increase would not alter the
legislature’s plan to increase the state’s cigarettes tax.
If revenue drops when smokers quit, tax proponents believe that
state health care dollars would be saved in the long run as
smoking-related illnesses decline. The higher price for cigarettes also
is seen as deterrent to young people and those with limited financial
The House and Senate plan to discuss the issue next week, according to sources.
Cigarette tax could replenish cut state funds
following includes excerpts from a Dec. 10, 2008 letter from Perry V.
Halushka, M.D., Ph.D., professor of pharmacology and medicine, and dean
of College of Graduate Studies and Carola Neumann, M.D., assistant
professor of pharmacology to colleagues. The letter was sent to members
of the South Carolina Senate.)
The steady state funding decline to MUSC during the past eight years
has placed current state funding at 1980s levels. Despite this, MUSC
has adapted to these financial constraints by ensuring excellence in
education, health care and research. In fact, MUSC has grown into a
critical economic resource and institution for the health and
well-being for the citizens of South Carolina. However, the most recent
dramatic budget cuts may significantly endanger the quality of health
care, research and education provided by MUSC.
MUSC holds a unique position among the institutions of higher education
in SC: Despite these financial reductions, MUSC generates $17 for each
state dollar invested via clinical revenues and research grants.
However, recent financial restrictions are beginning to endanger MUSC’s
high quality of health care, research and education. MUSC currently
receives only 40 percent of the Mission Resources Required that the
Commission on Higher Education says it needs. Therefore, MUSC already
is severely under-funded for its education mission as estimated by the
MUSC also carries the largest financial burden for the treatment of unfunded South Carolinians.
In this current fiscal climate, the state must find new revenues to
support its critical missions—educating its citizens and providing
health care. With a mere 7 cents per pack, South Carolina ranks last
among states in the amount it taxes cigarettes. The national average
cigarette tax exceeds $1 per pack.
The load imposed by inadequately taxed products that result in high
health care costs, i.e. tobacco products, ultimately is passed to the
South Carolina taxpayer in the form of uninsured patients, lost
productivity and a major financial burden.
Certainly, we need to reduce the number of smokers in the state, but it
is time to raise the cigarette tax and use it to provide the financial
resources the state could use to support the education and health of
Friday, Feb. 13, 2009