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State still pursues cigarette tax increase

by Mary Helen Yarborough
Public Relations
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 means.
The House and Senate plan to discuss the issue next week, according to sources.

Cigarette tax could replenish cut state funds

(The 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 commission.
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 its citizens.

Friday, Feb. 13, 2009

The Catalyst Online is published weekly by the MUSC Office of Public Relations for the faculty, employees and students of the Medical University of South Carolina. The Catalyst Online editor, Kim Draughn, can be reached at 792-4107 or by email, Editorial copy can be submitted to The Catalyst Online and to The Catalyst in print by fax, 792-6723, or by email to To place an ad in The Catalyst hardcopy, call Island Publications at 849-1778, ext. 201.