Stop a Tax Hike in Iowa!?

3 cigarette thefts, 4 days in D.M.; police say it’s tax

June 5, 2007
By TOM ALEX REGISTER STAFF WRITER

The $1 increase means a higher sales price – and a stiffer penalty for people who steal them.

A man walked into the Git-N-Go store at 816 E. Euclid Ave. in Des Moines on Sunday night and ordered a clerk to get out of the way. He loaded cartons of cigarettes into a garbage container and left, but not before he told the clerk he was sorry.

Depending on the number of cartons, he could be more sorry than he knows.

The higher cost of cigarettes – which is because of a tax increase signed into law by Gov. Chet Culver earlier this year – could have a heightened impact on those who steal them, Des Moines police Sgt. Dave Murillo said.

Because the severity of theft cases is related to the value of what’s stolen, “what used to be a simple misdemeanor may now be a serious misdemeanor,” Murillo said. “An aggravated misdemeanor may now be a felony.”

A theft of $900 in cigarettes is an aggravated misdemeanor, punishable by up to two years in prison. But if the heist is worth more than $1,000 – about 40 cartons – the charge is second-degree theft, punishable by up to five years.

Culver’s signature raised the tax on cigarettes and other tobacco products from 36 cents to $1.36.

Bandits have passed up cash registers at Des Moines stores and headed straight for the cigarette racks three times in the past four days, police said.

“You can’t help but speculate this is due to the tax,” Murillo said. “We haven’t seen people just walking in and taking large quantities of cigarettes like this before.”

– Two men left the Kum & Go store at 2930 Hickman Road shortly after 5 a.m. Monday with about a dozen cartons and fled in a red sport utility vehicle.

– At the Walgreens at 3501 Ingersoll Ave. on Friday morning, a man fled with $266 worth of Marlboros. He injured a clerk when he pushed her into a merchandise rack.

Wholesalers and truck drivers in Boone have been on guard since thousands of dollars’ worth of cigarettes were stolen from a Boone Freight Lines warehouse March 25, less than two weeks after the tax increase went into effect.

Des Moines Police Lt. Mark Morgan said the increase in cigarette thefts has mirrored what happens when gasoline prices rise.

Des Moines police took 121 gas-theft reports last month.

Reporter Tom Alex can be reached at (515) 284-8088 or talex@dmreg.com

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Tax stirs cigarette thieves, some fear
But authorities say they aren’t so sure

May 21, 2007
By MEGHAN V. MALLOY, REGISTER STAFF WRITER

Two months after Gov. Chet Culver signed a bill raising the tax on Iowa tobacco products from 36 cents to $1.36, thefts of tobacco products are prompting some fears of a black market for stolen cigarettes.

“Anytime you tax an item by 278 percent increase literally overnight, you are going to create a black market on that item,” said Dan McMullan, part owner of Caffrey Wholesale Inc. in Boone.

Wholesalers and truckers in Boone have been on guard after thousands of dollars worth of cigarettes disappeared from the warehouse of Boone Freight Lines on March 25, about 10 days after the tax went into effect.

Monica Pearson, office manager for the company, said someone broke in and “just helped themselves” to more than 500 cartons of cigarettes. Their estimated value was between $20,000 and $40,000, Boone County Sheriff Ronald Fehr said.

Fehr confirmed the four men charged in the case “were selling them for about $10 to $25 a carton.”

With the new tax, cigarettes typically retail anywhere from $38 to $42 a carton, depending on the brand.

In Des Moines, seven incidents of robbery or theft of cigarettes have been reported to police since the $1 tax increase went into effect.

The Kum & Go at 4200 Hubbell Ave. has been hit twice for cigarettes. Kum & Go spokesman Paul Kluding declined to comment.

On April 27, someone smashed in the front door of the BP gas station at 3801 Merle Hay Road. Store clerk Joyce Chasar told police that money was left untouched in the cash register, but several packs of cigarettes were gone.

Seven incidents are hardly a crime spree. Police Sgt. Todd Dykstra said police do not believe the tax increase prompted the thefts.

“There hasn’t been an increase in incidents in this specific time frame that we can see,” Dykstra said. “I don’t believe there’s any indication of a black market ring.”

Iowa House Majority Leader Kevin McCarthy said lawmakers expected somewhat of a swelling in crime when they were debating the bill.

“We suspected we’d see a short-term uptick, and that the bump would be immediate,” McCarthy said.

He added, “Tobacco is highly addictive and because of that, we knew some folks would engage in criminal activity.”

While he considers the Boone theft to be serious, he does not think tobacco-related crimes in Iowa are “a heinous problem.”

McCarthy said lawmakers want to work with police in the wake of the tax increase, reimbursing them for doing tobacco compliance checks and for cracking down on those who are “bootlegging cigarettes across the border.”

Federal officials said that they have been unable to tell if other states that dramatically increased cigarette taxes have seen black markets develop.

The increased tobacco tax is still “fairly new in several states,” said Michael Schmitz, an information officer for the federal Bureau of Alcohol, Tobacco and Firearms. “I’d say it’s too soon to really judge or see the impact of this increase in tax.”

Since the burglary, Boone Freight Lines has increased security on items such as cigarettes. Office manager Pearson declined to elaborate on what the changes were, although she said that “we’re always checking to see who’s out there and when.”

The four men charged in the Boone Freight Lines incident did not have a sure-fire strategy to sell the stolen tobacco, authorities said.

In fact, Sgt. Kenneth Kendall of the Boone County sheriff’s office said that once they realized they were being investigated, they allegedly dumped scores of cartons of the unstamped cigarettes in the Des Moines River to get rid of the evidence.
Reporter Meghan V. Malloy can be reached at (515) 284-8065 or memalloy@dmreg.com

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Was cigarette tax motivated by health or money?

April 13, 2007
By DREW ANDERSEN, Courier Staff Writer

WATERLOO — When Gov. Chet Culver signed the $1 cigarette tax increase into law on March 15, supporters of the bill touted its benefits for the health of Iowans. However, after another smoke-related bill was put on hiatus this week, some Iowans believe that the cigarette tax increase was motivated more by dollar signs than saving lives.

House Speaker Pat Murphy announced Thursday that proposed legislation giving control of smoking bans to local governing bodies was not likely to be signed into law this year. Murphy said because the bill had changed several times, legislators would need time to study it before debating the bill next year.

The Legislature’s decision to hold off on the smoking ban bill drew the ire of Buck Clark, owner of Jameson’s Irish Pub and Monica’s Piano Bar in Waterloo. He believes the failure to pass a smoking ban, or at least give control to local entities to enact bans, shows that the cigarette tax increase had little to do with the health of Iowa’s citizens.

“What they did just confirms my stance on the whole issue,” said Clark. “The dollar tax increase had nothing to do with health. It was just a vehicle to raise money for the state.”

Sen. Bill Dotzler, D-Waterloo, refuted Clark’s stance, noting that revenues from the tax would go to support health care programs. “I would disagree with his comments,” Dotzler said of Clark’s statement. “Clearly the cigarette tax was about health. Every bit of new revenue is spent in health care funding, medicare spending, and providing additional health care to low income individuals.”

The cigarette tax bill, Senate File 128, established a Health Care Trust Fund to hold the revenue from the tax. The bill called for the money in the fund to be used “only for purposes related to health care, substance abuse treatment and prevention and tobacco use prevention, cessation and control.”

But Chief Deputy Auditor Warren G. Jenkins is concerned that the Legislature could dip into Health Care Trust Fund for purposes other than its intended use. “One of our concerns, typically, is whether they will carry through with restriciting money for purposes that it is originally intended,” he said.

He cited other special funds, such as the Senior Living Trust Fund and the Rebuild Iowa Infrastructure Fund, as examples of money being “siphoned off for other purposes.” In fact, according to a February release by State Auditor David Vaudt, $73.4 million of the expected revenue from the cigarette tax is being earmarked to replinish the Senior Living Trust Fund in the governor’s FY2007 budget plan.

“I’m sure that we will look at it as part of our audit for the the year ending June 30, 2007,” said Jenkins. “One of the things we’ll look at is whether or not the (Health Care Trust Fund) is used for what it is intended to be used for. It will require vigilance by everyone to assure that the money is not being diverted to other purposes.”

The cigarette tax proponents have also claimed that by raising the price of cigarettes, current smokers will be encouraged to quit. However, Fred Abraham, head of the Economics Department at the University of Northern Iowa, said that a change in the price of cigarettes would have little effect on the demand for the product.

“The demand for cigarettes is highly inelastic,” said Abraham. “Consumers are relatively indifferent to price changes, within a certain range. Adding the tax on to cigarettes will cause some small decline in smoking, but I would guess that the impact would be neglible.”

Elasticity of demand is a measure of how sensitive consumers are to a change in price for a certain product or service. In the case of cigarettes, Abraham said that studies have indicated the elasticity for cigarettes is around 0.4 — a figure he said was extremely low.

Although Clark criticized the legislature for failing to pass the smoking ban bill, he was was not entirely disappointed that the bill failed. Both Jameson’s and Monica’s are non-smoking establishments, and Clark believes the non-smoking policy is partially responsible for the success of his businesses.

“A smoking ban would take away my competitive edge,” said Clark. “So in that respect, I’m okay that they didn’t pass it.”

Barmuda Corp. owner Darin Beck has been a strong opponent of the bill and has lobbied in Des Moines as the chairman of the Iowa Restaurant Association. He pointed out that in its most recent form, the bill could create a rift in communities like the Waterloo-Cedar Falls area, with multiple cities in one metro area.

“You simply can’t predict the outcome of allowing local entities to make that decision with towns so close and attached,” said Beck. He called the legislature’s attempt to “pass the buck” on to local governments a “cop out.”

Although Beck and Dotzler do not see eye to eye on the issue of a smoking ban, both are confident that the bill will eventually be passed in some form. “The latest development is only delaying the inevitable,” said Beck.

Clark, on the other hand, is not so sure. “It won’t happen any time inthe near future,” said Clark. “(Lawmakers) just don’t have the nerve to do it.”

Contact Drew Andersen at (319) 291-1418 or drew.andersen@wcfcourier.com.
Read

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Carlson: Iowans head for border to snag cheaper cigarettes

April 1. 2007
By JOHN CARLSON, REGISTER COLUMNIST

Lamoni, Ia. – It was very quiet in the little southern Iowa convenience store.

A few people were filling their cars with gas, but the cigarette business here was, well, nonexistent.

“We haven’t ordered cigarettes in two weeks,” said Desirae Silver, working the cash register at the Cenex store in this town on Iowa ‘s southern border. “I’ve sold one pack today.”

Want some action?

Drive south for about five minutes, park a few steps over the Missouri border, and talk to the folks at Stateline Conoco – if they have a second to spare.

“It’s nuts around here,” said Tammy Escrogin, ringing up a couple of cartons of Marlboros for a guy with Iowa plates on his truck.

“Crazy,” said Jennie Hancock, unloading boxes of cigarettes and frantically stocking shelves. “I’ve sold 27 cartons since I walked in here. It used to be five or six by this time. We got a shipment of 788 cartons today. It used to be 200 cartons.”

Of course, that was before the Iowa Legislature passed Gov. Chet Culver’s top-priority tax bill, adding $1 to the tax Iowans already paid for a pack of cigarettes.

That made Iowa ‘s cigarette tax $1.36 a pack, the 17th-highest in the nation. Missouri ‘s tax, at 17 cents, is the second-lowest in the country.

Stores in northern Missouri are filled with Iowans stocking up on cigarettes.

What about the Iowa law that prohibits people from bringing more than two packs of cigarettes at a time into the state? Forget it. Nobody is paying attention.

“The first day the Iowa law went in, we tripled our sales,” said Tammy Carlson, manager of the Kwik Zone store in Bethany , Mo. , 23 miles south of the Iowa border on Interstate Highway 35. “We’ve had double the sales since then, and it’s not letting up.”

The biggest sale so far at the Bethany store: the guy with Iowa plates on his car who drove out with 35 cartons of cigarettes.

Businesses, patrols not stopping Iowans

Nobody pushing cash register buttons in Missouri is breaking any laws. The buyer’s state of residence is his or her own business.

“We don’t have anything to do with the Iowa law,” Carlson said. “People can buy as many as they want, as far as I’m concerned.

“Besides, how can they monitor it? Set up an Iowa border patrol? I doubt it.”

She’s correct – so far.

“We don’t have officers at the border stopping cars,” said Renee Mulvey of the Iowa Department of Revenue and Finance, the state government’s tax collector. “We have no authority to do that.”

Maj. Darrel Cox of the Iowa State Patrol said: “We have no specific plans to seek out people specifically for this. We will, however, investigate if, during the course of a traffic stop, we notice somebody with a large amount of cigarettes.”

The Iowa Alcoholic Beverages Division, which would take action if an Iowa retailer were caught bootlegging out-of-state cigarettes, will not be doing any road enforcement. The attorney general’s office has not come up with a strategy for dealing with the activity.

“People should know there are penalties for violating the law,” said Bob Brammer, a spokesman for Attorney General Tom Miller. “It will be taken seriously if it comes to the attention of law enforcement.”

All of this means nothing is being done to police people bringing Missouri cigarettes into Iowa .

Normally upstanding citizens take risk

Iowa’s higher tobacco tax went into effect only two weeks ago, so there is no way to know yet how much revenue Iowa is losing to Missouri, Illinois, Nebraska and Wisconsin, all with a lower tax – or whether that loss of revenue is offset by collecting the higher tax from smokers who buy cigarettes in Iowa.

Missourians narrowly defeated a ballot measure last November that would have raised that state’s cigarette tax to 97 cents per pack. But even if it had passed, cigarettes there still would have been cheaper than in Iowa .

A major difference is that in Missouri , the decision was left to a vote of the people. In Iowa , it was the decision of legislators and the governor.

Iowans who make the trip south for cigarettes have plenty to say about the new tax.

What they were not interested in was giving their names, or even the towns where they live.

They’re not exactly smuggling grenades from Damascus to Baghdad . Still, these normally upstanding citizens know they are breaking the law by driving to Missouri to load up on their favorite smokes.

But they don’t care.

“Give you my name?” one Iowa woman said after buying a half-dozen cartons of Marlboros in Eagleville , Mo. , eight miles south of the Iowa line. “Are you kidding?”

Her plates said Dallas County . She looked to be in her 30s. She had a late-model SUV. Well dressed. Articulate.

She didn’t look much like a criminal. But she’s a scofflaw, and that’s fine – as long as I didn’t write down her license plate number and rat her out to Iowa ‘s nonexistent cigarette cops.

No chance of that, I promised, so she talked.

“The governor and the Legislature can do anything they want, I guess,” she said. “I’ll do what I want to do, and coming down here saves me a lot of money.”

Smokers say they don’t mind the drive

Another Iowa car pulled in, this one from Polk County . A 40-ish woman got out, went into the Eagleville Fireworks store and came out with four cartons of cigarettes.

“I just spent $85 on these,” she said. “At home it would cost me $160. So I just saved 75 bucks. Of course I’m going to do it. We were going to the casino in Osceola, anyway. It’s what, a half hour or so farther? I’ll do it again.”

One fellow in a car with Story County plates said he made the two-hour trip to Eagleville solely to buy cigarettes.

“It’s no big deal to me driving down here,” he said. “I hope it makes all the Iowa politicians happy. I mean, people go into bars in Iowa and get drunked up and drive and run into somebody. Why don’t they raise the liquor tax? Why don’t they tax the fancy golf courses and make the big shots pay more for that? No, they go after the little guy like me.”

The Finish Line store in South Lineville, Mo., sells Marlboros for $3 a pack and is having trouble keeping them in stock – probably because the Casey’s store in Humeston, Ia., 20 miles to the north, charges $5.10.

The Crossroads store in Princeton , Mo. , a small, low-volume place that sells liquor, guns, cigarettes and souvenirs, has Marlboros for $29.86 a carton.

A woman in the store said her daughter watched an Iowan pay $5,800 for cigarettes. That’s nearly 200 cartons.

“I can’t believe somebody in Iowa won’t start bootlegging,” said Bill Heck, owner of Crossroads. “It’s bound to happen.”

Buyers face stiff fines .. if they get caught

These people are taking a risk, but only if Iowa authorities are willing to spend the time and money to try to catch them. Bring between two packs and two cartons into Iowa and the fine is $200. It’s a $500 fine for bringing between two and 10 cartons into Iowa . More than 10 cartons and the fine is $25 a pack.

So that Iowan who brought in 35 cartons from the store in Bethany saved about $600. If caught after taking them across the border into Iowa , he would face a civil penalty of $8,750.

It hasn’t happened yet.

“I’m sure our law enforcement guys have better things to do than hang around the border searching people for cigarettes,” said Sen. Jeff Angelo, a Creston Republican who opposed Iowa ‘s tax increase. “I’m expecting it will be same boffo law enforcement job Iowa is doing on the law against bringing in fireworks from out of state.”

Angelo said he is hearing southern Iowa cigarette sales are down dramatically, and he doubts it’s because people are quitting the habit.

“What’s happening is people get together at work and pool their money, and somebody makes the run to Missouri ,” Angelo said. “This isn’t any surprise. Anybody with any sense knew this would happen – and it’s going to keep happening.”

Some expect trend to fade away

Sen. Herman Quirmbach, an Ames Democrat and supporter of the tax increase, said some cross-border buying was anticipated. He does not think it will continue to any large extent.

“Given the price of gas and the cost of operating a vehicle, it’s not really a cost-effective activity,” said Quirmbach. “Then there’s the risk of getting caught. I don’t really think it will go on for the long term.

“And if a business that depends on cigarette sales gets hurt, then that business was at cross purposes with the public health of Iowa to begin with,” he added.

Bill Walljasper, senior vice president of Casey’s General Stores, expects the Ankeny company’s southern Iowa stores to take a hit for a long time. He said Casey’s benefited in northern Iowa when Minnesota ‘s tax increased a few years ago.

“The same thing is happening in reverse in southern Iowa , and we think it will stay that way,” he said.

The Iowans coming across the border last week will tell you Walljasper is right.

“I’d be out of my mind to buy cigarettes in Iowa ,” said a woman from Polk County . “Say what you want about smoking, I’m not quitting. I’ll just be taking my money to Missouri from now on.”

Columnist John Carlson can be reached at (515) 284-8204 or jcarlson@dmreg.com
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IOWA TOBACCO PARTY

This is more and more resembling the Boston Tea Party.

Let’s not forget that this tax (I call it a FINE) was to off-set any healthcare costs caused by tobacco. But Culver and the Democrats (btw: I’m a Democrat) simply found a way to fund a whole array of programs on the backs of 20% of the population. What does smoking have to do with kids’ dental care or telemedicine???? These are just two of the programs the cigarette fine is going to help fund. And now, we hear it just might go into the general fund. Then, they will be back next year telling the legislature they need even more money from the evil smokers.

And who does this fine hurt the most? The poor and lower-income people who don’t have $300 – $400 on hand to make the trip to Missouri worthwhile. This is simply an insidious way to make the poor pay for their own healthcare since they make up the greatest percentage of smokers. It used to be that we Democrats helped the poor because they were poor. Now, we’ve put a price on that help.

Read this for an example of arrogant, elitist liberal claptrap (btw: I’m also a liberal. I just can’t stand the fat-cat elitists, like the guy I’m quoting below. I call them DINO’s – Democrats In Name Only)

Sen. Herman Quirmbach, an Ames Democrat and supporter of the tax increase, said “Given the price of gas and the cost of operating a vehicle, it’s not really a cost-effective activity,” said Quirmbach.

This guy teaches at ISU. I hope it’s not math. If you can drive 150 miles round-trip and have $300-$400 on hand to buy 15 cartons, you still can save over $100 even after the “price of gas and the cost of operating a vehicle”. How is that not cost-effective?

Besides, it’s the principle of the thing. Iowans are reacting to Legislators who only listened to the threats of the anti-smoking lobby. I hope Iowans continue to go south. I’d love to see the political uproar if and when the Governor starts a border patrol. I’d love to see the lawsuits that follow.

Tell me something. If I go to Missouri and buy a dozen pair of jeans or shoes, am I breaking the law if I bring them back to Iowa ?

Here’s more of Quirmbach’s arrogance and, sadly, what the Democrats have become.

“And if a business that depends on cigarette sales gets hurt, then that business was at cross purposes with the public health of Iowa to begin with,” he added.

Would he say the same about a liquor store? MacDonald’s? Burger King? Taco John’s? Aren’t these stores also at “cross purposes with the public health of Iowa “, especially Iowa ‘s expanding waistline? He doesn’t care if tobacco store owners might lose their businesses! He and others in the Legislature have – and have always had – the opportunity to ban the sell of cigarettes altogether in Iowa , but they don’t because they LOVE all that money that is “at cross purposes with the public health of Iowa “.

I don’t often advocate this, but one way to change an unfair law is to defy it. Keep going to Missouri . And buy your gas there, too.

Richard Maynard
Iowa State Coordinator
Smokers’ Club, Inc.

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House votes to raise tax on cigarettes $1 per pack
Gov. Culver is expected to sign the bill; cigarettes with the current levy will remain on shelves until they run out.

March 14, 2007
By JENNIFER JACOBS, REGISTER STAFF WRITER

The tax on cigarettes will nearly quadruple, and the tax on cigars, pipe tobacco and snuff will a little more than double.

The minimum markup that retailers must charge for cigarettes will be going up, too.

“It’s a double whammy,” said House Minority Leader Christopher Rants, a Republican from Sioux City.

Democratic leaders said the new tax laws, which the House approved with a 58-40 vote Tuesday night, will save lives – and generate more money to support health care programs. Eight Republicans voted for the bill; three Democrats opposed it. Two members were absent.

The cigarette tax will jump from 36 cents to $1.36 a pack.

A pack of Doral, for instance, will go from $2.58 to $4.10 with the higher cigarette taxes and increased merchant markups, and sales tax on top. The law sets a minimum base price for cigarettes to prevent promotional giveaways or major discounts.

The higher prices will kick in as soon as Gov. Chet Culver signs Senate File 128 into law, but cigarettes with the lower tax will remain on store shelves until they sell out, state officials said.

To prevent stockpiling of the cheaper cigarette tax stamps, the Iowa Department of Revenue is monitoring distributors’ orders to make sure they’re not buying more than in the past, officials said.

The extra money – at least the first $127.6 million generated each year – will be used for health care, such as treating smoking-related illnesses, or the treatment and prevention of substance abuse or tobacco use.

The average pack of cigarettes now sells for $3.45, but smoking-caused costs in Iowa equal $8.04 per pack sold, said Rep. Pam Jochum, a Democrat from Dubuque.

The $1-a-pack tax hike is expected to cut the overall demand for cigarettes by 19 percent, according to the nonpartisan Legislative Services Agency. About 20 percent of Iowa adults smoke, said anti-tobacco lobbyists, who predicted more than 20,000 current smokers will quit to avoid the higher tax.

Critics say it will push some Iowans to buy their cigarettes across the border into Missouri, where the tax is only 17 cents a pack, or into Nebraska, where it’s 64 cents.

Since January, when South Dakota’s cigarette tax jumped $1 to $1.53 a pack, South Dakotans have poured into Iowa for its 36-cents-a-pack tax, said merchants in western Iowa.

The Larchwood Food Center, a grocery store about half an hour from Sioux Falls, S.D., had to ratchet up its cigarette order from 70 cartons a week to 2,000, said manager Vonda Scholten.

Supporters of the tax increase said research shows people eventually abandon the treks for cheaper cigarettes.

“After two to three months, people go back to their old ways,” Jochum said. “It simply isn’t convenient. Not to mention the price of gas is too high.”

Republicans suggested the cigarette tax increase be 62 cents to make it equal with Illinois. Democrats, who hold the majority in the House, rejected that idea Tuesday night.

The tax on cigars and chewing tobacco will go from 22 percent to 50 percent of the wholesale price, or a maximum increase of 50 cents a cigar.

State law prevents retailers from selling cigarettes at less than cost, and this bill lets wholesalers and retailers charge more to cover their costs of doing business.

Rep. Dan Rasmussen, a Republican from Independence, said he doubts the extra $500 a year he’ll spend on cigarette taxes, sales taxes and merchant profits will be enough to break his habit of smoking about 20 Kools a day.

“It’s very addictive, and it’s very harmful – we all know the effects,” he said. “I think most smokers will tell you they quit smoking every time they smoked their last cigarette.”

Rasmussen said it’s critical that some of the new money be spent to prevent children and teens from lighting up.

Amy Johnson Boyle of Cedar Rapids agrees with that. Boyle’s father got hooked on the free cigarettes the government handed out during World War II and died of emphysema at age 76. Her mother, 81, has never smoked but has asthma from inhaling her husband’s smoke.

“It breaks my heart when I see young people smoking,” Boyle said, “because I know what the end is going to be, and it’s not pretty.”

Reporter Jennifer Janeczko Jacobs can be reached at (515) 284-8127 or jejacobs@dmreg.com

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Senate OKs cigarette tax hike
The increase, to $1.36 per pack, was approved early today on a 34-14 vote.

March 8, 2007
By JONATHAN ROOS, REGISTER STAFF WRITER

Smokers could soon be digging deeper into their pockets to pay a dollar-a-pack increase in the state cigarette tax.

A bill approved by the Senate early today would raise the cigarette tax from 36 cents to $1.36 a pack.

The tax proposal is a top priority of Gov. Chet Culver, who maintains the higher tax would discourage many Iowans from smoking while providing more money for health care programs.

Said Sen. Matt McCoy, a Des Moines Democrat guiding the legislation through Senate debate, “We know that significantly increasing the tax on cigarettes is the single most effective way to stop young people from being addicted to smoking.”

The proposed tax increase, which could be debated by the House next week, would take effect as soon as Culver, a Democrat, signs the bill.

“We’re going to try to do a one dollar cigarette tax increase,” said House Speaker Pat Murphy, a Dubuque Democrat. “The one thing we’ve heard very clearly is they would like those dollars to go to health care, and that’s the direction we’re headed in.”

Critics of Senate File 128 worry that nearly quadrupling the tax would hurt the competitiveness of Iowa businesses across the border from neighboring states with lower tobacco tax rates.

The bill was approved by the Senate on a 34-14 vote.

Money’s use debated

Republicans raised questions during the night-time debate about whether the additional tax revenue – about $130 million annually – would be dedicated to health care programs as leaders of the Democratic majority promise, or whether the money would be used to fuel more state spending in general.

“We think it’s very open to being scooped and used for other general fund purposes,” said Sen. Larry McKibben, a Marshalltown Republican.

“This bill is about a significant growth in Iowa’s governmental budget,” McKibben said.

The Senate, on a vote that largely followed party lines, rejected an amendment that would have allowed merchants a much higher markup on the sale of cigarettes in lieu of the dollar-a-pack tax increase.

McKibben said the proposal would achieve the goal of discouraging smoking through higher cigarette prices without increasing government spending.

Critics said it would deny the state extra revenue to offset the cost of health expenses from smoking-related illness.

Age amendment

The Senate also rejected an amendment that would have raised the minimum legal age for buying cigarettes from 18 to 21. Sen. David Hartsuch, a Bettendorf Republican, said the proposal would limit teenagers’ access “to this very dangerous drug.”

Efforts by Culver and the Iowa Department of Public Health to pressure lawmakers to vote for a dollar increase in the cigarette tax have drawn complaints from Republican legislators. Those efforts involve Culver’s use of postcards paid for with campaign money and the department’s approval of newspaper ads.

Senate debate of the major tax bill began Wednesday morning but didn’t resume until 9 p.m. so senators could attend scheduled committee meetings and take part in a dinner for Senate pages at a Des Moines-area restaurant.

Reporter Jonathan Roos can be reached at (515) 284-8443 or jroos@dmreg.com

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Stop a Tax Hike in Iowa!?

Despite the fact that Iowa is expected to post a budget surplus of $1 billion this year, Governor Chet Culver has proposed a $1.00 per pack increase in the cigarette excise tax, a 278 percent increase over the present 36 cents per pack state tax.???

Time and again, history has shown that higher excise taxes do not produce projected revenue.? Of 40 state excise tax increases enacted in recent years, only eight actually met or exceeded revenue estimates.? The other 32 states fell short of projections by as much as 67 percent.

What’s more, raising excise taxes targeted at consumers is regressive, disproportionately impacting the poor and those living on fixed incomes.? It will also encourage more people to purchase cigarettes in neighboring states or on the Internet, hurting Iowa retail outlets.? Worse yet, imposing so-called “sin” taxes on products like tobacco has encouraged illegal smuggling, which has even funded terrorist groups such as al Qaeda and Hezbollah!?

At a time of budget surpluses, there’s absolutely NO reason to raise ANY tax.? In fact, Gov. Culver should be returning surplus revenue to Iowa taxpayers in the form of a TAX CUT!?

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Republicans protest ads pushing for cigarette tax
They call it pressuring legislators for their vote; the governor’s spokesman says it’s simply ‘educational.’

By TONY LEYS, REGISTER STAFF WRITER
March 2, 2007

Republicans are complaining about efforts by Gov. Chet Culver and the Iowa Department of Public Health to pressure lawmakers into voting for a cigarette tax increase.

Republican legislators pointed to yellow postcards they received at the Capitol this week. The cards say, “70% of Iowans support a tobacco tax increase, why don’t you?” At the bottom, the cards say, “Paid for by Chet Culver Committee.”

The critics contended it’s illegal to use campaign funds to lobby the Legislature. Culver’s spokesman said the postcards did not amount to lobbying, but were simply “educational.” The head of the state campaign ethics board declined to offer an opinion.

Republicans also complained about newspaper ads urging Iowans to tell specific legislators to vote for the cigarette tax increase. The ads, approved by the Iowa Department of Public Health, cost $54,000. They were financed with money the Legislature granted to the anti-smoking group Just Eliminate Lies.

House Minority Leader Christopher Rants said the postcards broke state law, and he predicted a complaint would be filed with the Iowa Ethics and Campaign Disclosure board. He said the newspaper ads, while possibly legal, were an inappropriate use of public money. “Those are dollars that could be going into smoking cessation or prevention,” he said.

Culver, a Democrat, has been an outspoken proponent of the cigarette tax increase. His spokesman said Culver decided to use about $680 from his campaign fund to print about 10,000 of the postcards, which were handed out to anyone who wanted them. The cards were designed to be addressed to legislators, and they urge a vote for the $1-per-pack increase.

But Culver spokesman Brad Anderson noted that the cards did not include a legislative bill number, so he said they could be considered educational materials, which would be permitted.

He also said he saw nothing inappropriate about the newspaper ads. He noted that state agencies are allowed to spend public money on lobbyists, and he said he saw little difference between that practice and the purchase of the ads.

Health Department spokesman Kevin Teale said a department administrator approved the ads, which were designed by an ad agency that contracts with the state-financed Just Eliminate Lies group. Teale said the ads were part of the group’s mission to cut down on youth smoking. He said they targeted 12 state representatives identified as being undecided on the tax increase or uncommitted to a $1 hike. Similar ads also have run on the radio, Teale said, but they were financed privately.

In the Des Moines area, the ads targeted Rep. Walt Tomenga, R-Johnston. They urged people to call or e-mail Tomenga and tell him to support the dollar increase in the cigarette tax. “Tell Representative Walt Tomenga you don’t want a compromise on lives,” said a half-page ad in The Des Moines Register.

Tomenga said the campaign was both inappropriate and ironic. He said public money should not be used this way. He also said he is one of the Legislature’s strongest proponents of a cigarette tax increase, and he was surprised to be identified as “undecided” on a $1 increase. “I’d support $2 if we could get it,” he said.

Tomenga said he received “dozens and dozens and dozens” of phone calls this week from people who’d seen or heard the ads and wanted him to vote for the tax increase. He did not answer the phone messages because there were too many, but he responded to e-mail messages from his district. “I told them I’d been a longtime supporter and not to worry,” he said.

Charlie Smithson, executive director of the Iowa Ethics and Campaign Disclosure Board, said he believes the newspaper ads are legal. He agreed with Anderson that they would fall under the same rules that allow public agencies to hire lobbyists.

Smithson declined to express an opinion on the legality of the postcards. He said the law does not specifically say whether campaign finances may be used in such a way. His board would consider the matter if someone files a complaint, Smithson said.

Reporter Tony Leys can be reached at (515) 284-8449 or tleys@dmreg.com

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$1 increase in cigarette tax?

February 22, 2007

Gov. Chet Culver has proposed raising the cigarette tax by $1 a pack, from 36 cents to $1.36. Proponents say that would discourage smoking while raising an estimated $135 million to expand health-care programs. Opponents say it’s a regressive tax that would unfairly burden the poor and would hurt businesses in border communities if a neighboring state’s tax is lower.

One bill introduced in the Legislature would raise the tax by a lesser amount — 64 cents, to $1. Various bills would direct the money to different places, such as expanding Hawk-I and Medicaid for low-income Iowans or funding the Senior Living Trust, which provides long-term care alternatives for the elderly.

YES: Discourage smoking and improve health

In recent weeks, members of the Iowa Legislature have engaged in discussion about various strategies to tackle rising health-care costs and to expand access to affordable health-care coverage. It’s a complex problem with many possible solutions, but one fact is undeniable: Rising costs are directly related to the health behaviors of Iowans.

There is no longer any doubt smoking is one health behavior adding to the growing cost of health care. It’s the leading cause of preventable death for smokers and non-smokers. The added health-care costs associated with smoking are passed on to the government, health insurers, employers and eventually, disproportionately to nonsmokers. The Principal Financial Group supports adding $1 to the state tax on tobacco products to lower the financial impact of smoking and to fund expanded access to health-insurance coverage.

Currently, 20 percent of Iowans smoke. According to the Iowa Department of Public Health, tobacco use increases health-care expenditures by $617 million annually. While tobacco taxes generate $85 million per year for Iowa’s general fund, the state’s Medicaid program spends approximately $277 million annually treating tobacco-related illnesses.

Smoking often begins as a habit, but grows into a powerful addiction. Tools such as tax increases can break this cycle. Research has proven higher-priced tobacco discourages first-time smokers from lighting up and encourages current smokers to quit. According to the Campaign for Tobacco-Free Kids, a $1-per-pack increase would result in nearly 21,000 young Iowans quitting smoking.

Iowa’s current 36-cent-per-pack cigarette tax is dated and not in alignment with the average non-tobacco-producing state. By better aligning our tobacco tax with other states, we will make an impact. The Principal Financial Group endorses a $1 increase, as proposed by Gov. Chet Culver, for the specific purpose of improving the health of Iowans. We believe revenue raised by the tobacco tax should be allocated toward reducing smoking-related health costs and expanding access to health-care coverage for children and adults at or near the poverty level.

By making it more expensive to purchase tobacco products, we will take a significant step toward improving the health of Iowans. Dollars spent today on smoking-related illnesses may someday instead contribute toward a healthier future for the citizens of our state. As a concerned employer and community member, we support and encourage our legislators to pass this into law and to continue promoting healthy lifestyle choices.

— BARRY GRISWELL is chairman and CEO of Principal Financial Group, and JOHN ASCHENBRENNER is president of Insurance and Financial Services for Principal.

While it’s necessary for Iowa to tax in order to fund government operations, the state should not tax anyone for the benefit of third parties. Yet, that’s exactly what the proposed $1-a-pack cigarette tax hike would do.

Health care in the United States is the most wasteful among all developed nations. Americans spend more for health care than do other developed nations and have lower life expectancy. Throwing tobacco-tax money at this problem won’t fix it and in fact may encourage more waste. In addition, Iowa’s current proposal doesn’t even guarantee that smokers will get better health care. The funds will also be spent on overeaters, overdrinkers and a whole host of people engaging in other risky behaviors. Why should they get a free pass?

Supporters of the $1 tax claim that smoking is breaking the health-care system. “Not so,” says the Congressional Research Service. Its investigation revealed that smokers’ external costs were only 33 cents a pack and that higher estimates made by antismoking groups were flawed. According to these reports, “Smoking has apparently brought financial gain to both federal and state governments, especially when tobacco taxes are taken into account.”

Iowa’s smokers already pay a 36-cent state and 39-cent federal excise tax, in addition to approximately 50 cents into the tobacco-settlement fund. They pay a 6 percent sales tax on top of all that, making cigarettes the highest-taxed product in Iowa.

Studies by the National Taxpayers U nion have concluded that “those making less than $30,000 per year shoulder 60 percent of the burden of tobacco taxes, while those making over $100,000 per year bear just 1-2 percent.” As much as tax proponents try to spin it otherwise, the tobacco tax is regressive. It targets lower-income people by trying to tax them into healthier behavior. That’s not a tax; it’s a fine.

Do higher taxes reduce smoking? Not according to a 2006 report by the Pacific Research Institute. It pointed out that nationally, despite tax hikes, adult and teen smoking rates were not down any more than would be expected, based on smoking trends since the 1960s. If prices affected teen smoking, it would have all but disappeared by now.

While it may be enticing to force a politically unpopular group to fund Iowa’s health-care system, other states have found that cigarette-tax hikes fail to fix any of the problems they are meant to address. Indeed, last November, California and Missouri voters overwhelmingly rejected proposed cigarette-tax hikes. Let’s hope the Iowa Legislature is equally wise.

— DAVID W. KUNEMAN of St. Louis, a research pharmaceutical chemist, is the noncompensated director of research of the Smokers’ Club Inc., a nonprofit organization that does not receive funding from tobacco companies.

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