Tobacco tax to become law.

Weeks of debate finally ended this morning as the Senate voted 28-7 in favor of Gov. Beebe’s proposed tobacco tax hike. 27 votes were required for passage.

This morning’s vote was an anti-climatic finale. Senate galleries were packed, but the debate had none of the suspense of last week’s boisterous House vote. Those opposed to the tax seemed resigned to their defeat. While four senators made brief remarks supporting the tax, only Sen. Johnny Key spoke against it. He said he did not believe that this is the time to raise taxes.

The only surprise was a yes vote from Sen. Terry Smith, who made a motion in committee yesterday that would have jeopardized the bill by amending it and sending it back to the House. Rep. Robbie Wills said after the vote that he had constantly impressed upon Sen. Smith, a fellow Democrat, that his support was needed, though Rep. Wills was unsure whether Sen. Smith changed his mind due to the pressure.

The tax will go into effect on 1 March. Legislation is still to be passed to create a trauma system, which the tax will fund.

Tobacco-tax supporters win round one.

In its most anticipated meeting of the session to date, the House of Representatives this afternoon narrowly approved HB1204 increasing the statewide tax on tobacco. The measure attracted 75 yes votes — the exact number needed to raise the tax.

House Speaker Robbie Wills, one of the bill’s most vocal supporters, had repeated over the course of this week that there would be enough votes for passage. But this afternoon it emerged that the House leadership only became certain of success last night, when Rep. Garry Smith decided to switch his vote in favor of the bill.

After the vote, Rep. Smith said that he made up his mind yesterday evening while driving to Fayetteville for an Arkansas Razorbacks basketball game. By 7 p.m., he had come to his decision.

“It was not just District 7 I voted for,” said Smith in reference to his Camden-area district. “It was 2.9 million people in the state of Arkansas.”

Leadership of opposition to the bill professed surprise at Smith’s vote. “I thought all along he was a hard no,” said Rep. Bryan King, who held a press conference against the measure on Tuesday.

For those not privy to the inside baseball beforehand, the vote had more than a whiff of drama. Two packed galleries watched the proceeding, which was gaveled to order at one point when opponents tried to shout down a speaker at the podium.

Rep. Greg Reep, lead sponsor of the bill in the house, gave a speech on the floor emphasizing the health benefits the tax increase would provide, including a trauma system, services for the elderly, community health centers and an expansion of ARKids coverage to 8,000 new children.

Rep. Reep drew laughs from some members when he said he was a fiscal conservative. When he argued that the state had balanced the budget, a representative opposing the tax increase yelled, “It’s the law!” in reference to the balanced-budget mandate in the Arkansas Constitution. Rep. Wills called for quite and chastised the shouter.

(Read on for more on the vote.)

Tobacco tax bill sails through committee.

Advocates for an increased tobacco tax came one step closer to their goal today as the House Rules Committee unanimously passed HB1204. The bill could come before the full House for a vote as early as tomorrow.

The only person to speak against the measure was a cigarette wholesaler, who complained that the tax increase will place an unfair burden on his business. He said he would have to take out a large loan to pay for cigarette stamps, which distributors must purchase before they sell their stock.

But legislators disputed claims of undue hardship. They pointed to recent additions to the bill that would increase a state discount to distributors, and they argued that credit could be extended for the purchase of stamps.

“The bill has a 270% increase in allowance for wholesalers,” House Speaker Robbie Wills told the committee in his argument for the bill.

Rep. Wills also repeated earlier assertions that he has the votes needed to pass the measure through the house.

The current version of the bill has several changes from the original filing. Besides the wholesaler allowance, the new version alters the way chewing tobacco is taxed. The original allowed for a tax based either on manufacturer’s price or on weight, whichever was higher. The current version includes a tax on price only. At 68%, that rate is slightly higher than the 64% originally proposed. Also, the current bill no longer distinguishes between ‘moist snuff’ and other non-cigarette tobacco products.

Armey derides tobacco tax; King derides AR law schools; Beebe derides partisan tactics.

Fighting over Gov. Beebe’s proposed tobacco tax increase reached a new peak today as Former U.S. House Majority Leader Dick Armey spoke against the hike at the Capitol rotunda. Supported by a contingent of Arkansas legislators — including Arkansas House Minority Leader Bryan King, who recommended that the state shut down one of its law schools to save money — Armey assailed what he saw as unnecessary spending in the Governor’s tax-funded healthcare package.

In front of a largely unsympathetic crowd — one of many pro-tax signs said Dick, Stop Blowing Smoke — Armey repeated arguments against the tax that have been in wide circulation. He said that people would buy their cigarettes in other states, that the tax was regressive and unfair to smokers, and that the state should fund a trauma system through some other means. He offered support for HB1238, which proposes to fund the system through fines on drunk driving, domestic violence and other criminal offenses.

“Are we here in Arkansas a state that dislikes smokers more than it dislikes wife beaters?” Armey asked.

But Armey also went beyond commonplace arguments against the tax to pin supporters of the increase as big-government profligates. “If you want to fund a trauma system, you ought to scrub your budget and make room,” he said.

Armey went on to accuse Beebe and other tax supporters of larding their proposal with unnecessary measures and cutting backroom deals in order to attract votes. (Tobacco tax money not spent on a trauma system will be used on other healthcare provisions.) He declined to say which parts of the proposal he meant.

Asked after the rally about Armey’s claims, Rep. King also spoke in nonspecific terms. “It started with a trauma center, and now it’s a trauma system,” King said. “Rural health is a great cause, but people need to know that they won’t get the money that gets promised to them [from a tobacco tax increase].”

(Read on for more, including details on a debate between Armey and AR Surgeon General Joe Thompson, Rep. King’s proposal to close an Arkansas law school, and Gov. Beebe’s reaction to the rally.)

As tobacco tax bill is filed, Beebe stresses its breadth.

On the heels of this morning’s filing of the cigarette tax bill, HB1204, Gov. Beebe and over a dozen state legislators held a rally at Children’s Hospital to stress the urgency of its passage. Not only will the bill fund a new trauma center, Beebe told a packed room; it will also pay for numerous other health programs that will help Arkansans across the state.

Beebe’s emphasis on the totality of his proposal is an important step toward passing the legislation. Legislators opposed to raising the cigarette tax have suggested that a trauma center can be paid for by such means as raising fines for drunken driving. By presenting the tax package as a means to fund numerous programs, and not just a trauma center, the governor’s office may make it much more difficult for lawmakers to say no.

One such lawmaker is Senate President Pro Tem Bob Johnson, who professed his support for the increased tax at today’s rally. “I stand before you as someone who has never supported a tobacco tax,” he said. “I am full-bore for it this session.”

Beebe also tried to correct the perception circulating around the legislature that a trauma center would lard only a few Little Rock hospitals. People in rural areas would benefit from the system, he said. There will be no new hospitals, just increased resources at existing ones. And a trauma system will consist of more than a few hospitals. Though a main one will be in Little Rock, Arkansas Surgeon General Joe Thompson has said that he expects as many as 40 hospitals to participate.

(Read on for the bill’s prospects and its new provisions on smokeless tobacco.)

Taxing chaw.

As I reported yesterday, part of Gov. Beebe’s healthcare initiative incorporates a hazy $10 million in additional revenue from a reformed smokeless tobacco tax. In fact, the only information given about the possible tax is the $10 million figure.

Surgeon General Joe Thompson, who has been presenting the initiative at committee meetings, has now provided more detail on what the governor’s office wants.

Currently chaw is taxed at a 32 percent rate based on package price.** The governor’s office wants to change the formula, but it’s unclear whether they will do so by upping the package rate or by taxing based on the weight of the product.

There is currently an industry dispute over which tax is preferable. Brand-names such as Skoal and Copenhagen want the tax to be based on weight: that would ensure that a package of their chaw is taxed at the same rate as a comparably sized package of generic smokeless. Makers of generic tobacco, which sell their product at a lower price than the brand names, want a per package tax.

While Beebe’s office is currently allowing the smokeless industry time to come to an agreement, it expects to soon propose its own tax structure, whether or not the industry comes up with a formula.

“It would be incumbent on the industry to resolve the issue as soon as possible,” Thompson said.

Beebe’s healthcare initiative richer than expected; some skeptical.

In a meeting of the Senate Committee on Public Health, Welfare and Labor this morning, Arkansas Surgeon General Joe Thompson presented the specifics of Governor Beebe’s health care plan, including details on how he wants to spend proceeds from his proposed 56-cent cigarette tax hike.

Bottom line: Beebe’s estimated tax revenue is higher than the $71 million figure he provided reporters at a press conference last week. If legislators give Beebe the cigarette tax and a reformed tax on smokeless tobacco, the state would reap $85.4 million in fiscal year 2010 and $85.8 million in FY 2011. $10 million of that money each year would come from the chaw tax, though details of how the levy would work remain fuzzy. Including matched funding, the state would have  $177.9 million available in 2010 and $175.3 in 2011 for healthcare.

But the if is a big one. Questions at today’s meeting indicated that some legislators are skeptical about the tax and how the revenues are to be spent. Along with reports that lawmakers are looking to fund a proposed trauma center through means other than the cigarette tax, reactions to Thompson’s presentation suggest that Beebe may have a fight ahead of him on the issue.

(Read on for details on proposed spending and committee members’ reactions to the cigarette-tax package.)