N.C. Legislators Weigh Cigarette Tax Hike

RALEIGH, N.C. -- Long considered the most tobacco-friendly state in the nation, North Carolina now seems poised to increase cigarettes taxes.

As North Carolina's budget gap widens to as much as $2 billion next year, legislative leaders in North Carolina appear reluctant to raise taxes for the second year in a row. "We're not looking at any tax - none, not any," said Sen. Marc Basnight (D-Dare) "That's not to say we won't at any time, because I never take anything off the table."

Basnight and the tobacco industry argue that smokers already pay higher prices for cigarettes because of the industry's $206 billion settlement with the states in 1998, and that the money goes to the states, the Winston-Salem Journal reported.

"We've already got cigarette taxes disguised in the form of a lawsuit. The tax on cigarettes to the consumer is already there," Basnight said.

At 5 cents a pack, North Carolina has the third-lowest cigarette tax in the country. Virginia taxes cigarettes about 2 cents a pack, Kentucky at 3 cents a pack and South Carolina at 7 cents a pack. In non-tobacco states, state taxes range as high as $1.42 a pack in Washington state. The nationwide average is 34 cents a pack.

As other states encounter budget troubles similar to North Carolina's, officials in Connecticut, New York, Utah, Nebraska and Maryland have already raised cigarette taxes this year. Even in the heart of tobacco country, some legislators have begun to propose higher taxes on tobacco and alcohol, the report said.

In a poll conducted for Senate Democrats, a broad majority of voters statewide supported taxes on tobacco products. "I think there is a great deal of sentiment," said Sen. Ellie Kinnaird (D-Orange), who says she will sponsor a bill to increase the tax by 25 cents a pack when legislators return to Raleigh this month.

The state's excise tax of 5cents a pack raises $35 million a year, so legislative analysts project that an additional 25cents a pack would raise at least $150 million for a cash-strapped state, the report said.

Tobacco industry officials are fighting cigarette-tax increases in at least 25 states, in addition to the five that have already passed excise-tax increases. "We'll continue to adamantly oppose an increase in the excise tax," said Tommy Payne, a senior vice president at R.J. Reynolds Tobacco Co.

Since the 1998 settlement with the states, the average price of a pack of cigarettes nationwide has climbed from $1.95 to $3.27, Payne said, and 60 cents of the increase can be attributed to the cost of the settlement. "You're getting a ton of [settlement] payments, which is in essence a tax on smokers," Payne said. Of the $3.27 average price of a pack, national and state governments take $1.54.