Alabama Faces Cigarette Tax Hike

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Alabama Faces Cigarette Tax Hike

MONTGOMERY, Ala. -- Alabama is the latest state facing an increase in cigarette prices following a proposed 14.5-cent-per-pack excise-tax increase -- to 31 cents -- as part of Gov. Bob Riley's $1.2-billion tax proposal. Voters will decide the measure in a Sept. 9 referendum.

Arleen Alexander, industry affairs chief for the Alabama Association of Convenience Stores, said her organization opposes any cigarette tax increase. However, the group halted its opposition to Riley's tax package after an amendment capping local tobacco taxes at their current levels was approved. "If we had not gotten that provision in there, we would have fought it some more," she said.

Tom Coker, a lobbyist for tobacco giant Philip Morris, would normally oppose a plan calling for a nearly 100-percent increase in taxes on a pack of cigarettes. But Coker says the 14.5-cent jump is reasonable and is necessary for badly needed tax reform. "I don't want to say that I necessarily go out and look for a tax vote on my clients, but everybody's got to share in making this successful," he said. "Everybody has to bear some of the burden."

Riley says his tax plan is needed to erase Alabama's biggest deficit since the Depression and improve education. The plan also seeks to help the poor by raising the income level at which people have to begin paying state taxes.

State Finance Director Drayton Nabors said officials considered the cigarette taxes in neighboring states to determine how much of an increase was appropriate. "We looked at what other states are doing and the 31 cents made sense," he said.

If the tax on smokes is installed, Alabama's cigarette tax will be higher at 31 cents per pack than Mississippi's (18 cents) and Tennessee's (20 cents), but lower than Georgia's (37) and Florida's (33.9), the report said.

However, critics point out that none of the border states allow local tobacco taxes on top of the state tax as in Alabama, where some local taxes can reach as high as 21 cents per pack on top of the state tax. Still, even with local taxes, Alabamians would pay far less for a pack of cigarettes under the plan than residents in many other states around the country.

Take New York: Residents there pay $1.50 per pack in state taxes plus an additional excise tax of $1.50 per pack. Thus, a $3 pack of cigarettes in New York costs $6. New Jersey's tobacco tax is $1.50 and a proposal there would increase it to $1.90, and Massachusetts' is $1.51, the report said.

Alexander, from the Alabama convenience stores association, said some store owners are concerned residents will buy tax-free cigarettes at Creek Indian reservations or cross the state line where there are no local cigarette taxes to purchase their Marlboros and Kools. "The ones that are around our border are real worried," she said.