Business Groups Divided on Tobacco Tax-Hike Issue

Posted on October 18, 2002 | Type: In the News | Author: Mike Sunnucks
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The business community is split over a referendum that would hike state cigarette taxes.

Proposition 303 would increase the levy on cigarettes from 58 cents per pack to $1.18 per pack. It would be one of the highest such taxes in the nation and put the state in the company of Massachusetts, New Jersey, and New York.

If approved by voters in November, the measure would generate an additional $149 million in revenue annually. The cash would go toward various health care and medical initiatives including emergency for the poor and public health education.

Business groups and the health care industry support prop. 303 while the Arizona Chapter of the Farm Bureau Federation and the other anti-tax hawks oppose the increase.

The Arizona, Scottsdale area and Greater Phoenix chambers of commerce have endorsed the measure despite their historical hesitancy to support tax increases.

Those influential business groups are heavy with health care companies that want more state financial assistance to help with uninsured patients.

"The chamber's board was compelled to support Prop. 303 because of the resources it would provide to trauma centers, emergency rooms, medical research and assistance to Arizona's uninsured," said Jay Kaprosy, director of Government relations for the Greater Phoenix Chamber.

Arizona has some of the highest rates of uninsured in the nation due to its significant immigrant population and proximity to the Mexican border. Federal and state laws require hospitals to provide emergency and other medical services to those patients. In 2000, state voters approved Proposition 204, which expanded Medicaid coverage throughout the state.

That is creating a terrific strain on health care firms, according to industry observers and business lobbyists.

The health industry and its business allies see Prop. 303 as a direct and long-term funding source for health care mandates without taking away from state endeavors in critical areas such as education and public safety.

That logic is furthered by the state's worsening fiscal crisis, which puts budget deficits at between $500 million to $1 billion.

"It's important to get those unfounded mandates funded," said Farrell Quinlan, vice president of the Arizona Chamber. "We don't wake up in the morning looking for ways to raise taxes, unlike others."

Anti-smoking and public health groups also support 303 because of its financial benefit and in hopes that increases cigarette costs will dissuade tobacco use.

Business opponents to Prop. 303 do not like high taxes on legal products and worry about government dictation of personal and consumer behavior.

The 17,000-member Arizona chapter of the conservative-leaning Farm Bureau Federation has come out against 303. Farm Bureau lobbyist Joe Sigg said the group does not question the health care needs and costs being talked about by 303 supporters. He just questions the philosophy of high cigarette levies.

"People are starting to talk about the same thing for fast foods," said Sigg "It's a bit of a slippery slope taxing a legal product."

The conservative Goldwater Institute-which has many fans in the business community-also opposes 303. The free-market think tank says high tobacco levies hurt poorer populations because of the regressive nature of sales taxes and the demographics of tobacco use. The Goldwater group also argues that high product taxes will lead to black market smuggling.

The National Federation of Independent Businesses-which often is a strong opponent of tax increases-is not taking any stance on 303 or other November ballot measures, said Arizona Director Michelle Bolton.

Arizona's cigarette tax has not been increased since 1994. The current 58 cents per pack is just below the national average tax of 60 cents per pack.

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