Tax Fight
R.J. Reynolds challenges new state tobacco-tax hike
Dec. 17, 2006
And now for our next act . . . After spending $8.7 million in a losing effort to exempt bars from a smoking ban, R.J. Reynolds may put more money into fighting the state’s tobacco-unfriendly policies.
The tobacco company is scouting around for attorneys to challenge the state’s new 80-cent tobacco tax. No word yet on whether a lawsuit may materialize, but some believe the tax, which took effect this month, is ripe for a challenge.
That’s because the ballot language for Proposition 203 stated that the tax would be 0.80 cents per pack of cigarettes, or less than a penny. The decimal point was dropped when the Arizona Secretary of State’s Office prepared the ballot. The error was not caught by the Attorney General’s Office when it reviewed the ballot language.
The Attorney General’s Office this month issued an opinion that the tax was 80 cents a pack, citing language in the longer ballot text that said the tax would be 4 cents per cigarette, which works out to 80 cents a pack. Smokers have been complaining ever since.
R.J. Reynolds bankrolled another smoking measure on last month’s ballot, Proposition 206, which proposed a statewide smoking ban that would exempt bars and the bar areas of restaurants. It failed.
Cigarette taxes from propositions hit Dec. 4, but Prop. 203 levy faces suit
By Howard Fischer
11.18.2006
PHOENIX — Attention smokers: You’ve got until Dec. 4 to stock up on your smokes without getting hit in the wallet.
That’s the date the state Department of Revenue expects to begin collecting two new taxes approved by voters. And agency spokesman Dan Zemke said that unless his bosses hear otherwise from the Attorney General’s Office, those new levies will total 82 cents a pack.
But there may be a legal fight: A spokesman for R.J. Reynolds said Friday his company is exploring whether to challenge the Department of Revenue’s conclusion that when voters approved Proposition 203 they really intended to impose a tax of 80 cents a pack.
John Singleton pointed out the actual language people saw on their ballots said that the measure, designed to raise money for early-childhood programs, would impose a tax of “.80 cents/pack” — or, technically speaking, eight-tenths of a cent.
By contrast, the text of the initiative, not on the ballot, calls for a levy of four cents a cigarette, meaning 80 cents a pack. The error, made by the Secretary of State’s office, went undetected until several days before the election, too late to reprint the ballots.
“We feel it’s a legitimate thing to look at,” Singleton said of litigation.
Zemke said that when the official election results are certified Dec. 4 — and Proposition 203 is officially law — it is the job of his agency to begin enforcing that law. He said that means the text of the actual statute — not the erroneous explanation provided on the ballot.
“The statute clearly says four cents per cigarette,” he said. But the agency is hedging its position: It has asked Attorney General Terry Goddard if he believes that’s what the law requires.
There is no controversy over a separate 2-cent-a-pack levy imposed as part of Proposition 201. That is designed to pay for enforcement of that measure’s ban on smoking in most public places.
The tax also takes effect when the governor issues her proclamation, though the ban itself does not become effective until May 1.
Zemke said that while both taxes become effective Dec. 4, that doesn’t mean prices will go up immediately — though they legally can.
Arizona levies tobacco taxes on the wholesalers who have to buy those familiar stamps attached to each pack, verifying the state tax has been paid.
Cigarettes that already have the stamps attached before Dec. 4 can continue to be sold at the current $1.18 levy rather than the new $2-a-pack rate. That includes both those in stores and those awaiting shipment.
But Zemke said retailers can immediately raise the price on all of their cigarettes — even those they bought at the lower price — as there are no cost controls on tobacco products in Arizona.
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By Howard Fischer
11.18.2006
PHOENIX — Attention smokers: You’ve got until Dec. 4 to stock up on your smokes without getting hit in the wallet.
That’s the date the state Department of Revenue expects to begin collecting two new taxes approved by voters. And agency spokesman Dan Zemke said that unless his bosses hear otherwise from the Attorney General’s Office, those new levies will total 82 cents a pack.
But there may be a legal fight: A spokesman for R.J. Reynolds said Friday his company is exploring whether to challenge the Department of Revenue’s conclusion that when voters approved Proposition 203 they really intended to impose a tax of 80 cents a pack.
John Singleton pointed out the actual language people saw on their ballots said that the measure, designed to raise money for early-childhood programs, would impose a tax of “.80 cents/pack” — or, technically speaking, eight-tenths of a cent.
By contrast, the text of the initiative, not on the ballot, calls for a levy of four cents a cigarette, meaning 80 cents a pack. The error, made by the Secretary of State’s office, went undetected until several days before the election, too late to reprint the ballots.
“We feel it’s a legitimate thing to look at,” Singleton said of litigation.
Zemke said that when the official election results are certified Dec. 4 — and Proposition 203 is officially law — it is the job of his agency to begin enforcing that law. He said that means the text of the actual statute — not the erroneous explanation provided on the ballot.
“The statute clearly says four cents per cigarette,” he said. But the agency is hedging its position: It has asked Attorney General Terry Goddard if he believes that’s what the law requires.
There is no controversy over a separate 2-cent-a-pack levy imposed as part of Proposition 201. That is designed to pay for enforcement of that measure’s ban on smoking in most public places.
The tax also takes effect when the governor issues her proclamation, though the ban itself does not become effective until May 1.
Zemke said that while both taxes become effective Dec. 4, that doesn’t mean prices will go up immediately — though they legally can.
Arizona levies tobacco taxes on the wholesalers who have to buy those familiar stamps attached to each pack, verifying the state tax has been paid.
Cigarettes that already have the stamps attached before Dec. 4 can continue to be sold at the current $1.18 levy rather than the new $2-a-pack rate. That includes both those in stores and those awaiting shipment.
But Zemke said retailers can immediately raise the price on all of their cigarettes — even those they bought at the lower price — as there are no cost controls on tobacco products in Arizona.
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Voters reshape legal landscape in Arizona
Nov. 8, 2006 01:35 AM
Amanda J. Crawford and Pat Kossan, The Arizona Republic
Arizonans made sweeping changes to state law on Tuesday, ushering in a higher minimum wage, passing a strict statewide smoking ban and a higher tobacco tax, improving living conditions for some farm animals and restricting cities’ use of eminent domain.
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Nov. 8, 2006 01:35 AM
Amanda J. Crawford and Pat Kossan, The Arizona Republic
Arizonans made sweeping changes to state law on Tuesday, ushering in a higher minimum wage, passing a strict statewide smoking ban and a higher tobacco tax, improving living conditions for some farm animals and restricting cities’ use of eminent domain.
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Tiny typo, big effect on ballot
Language calls for ‘.80 cent’ tax hike on cigarettes, not 80 cents, or about $186 mil less than intended
Language calls for ‘.80 cent’ tax hike on cigarettes, not 80 cents, or about $186 mil less than intended
Oct. 25, 2006
Mary Jo Pitzl, The Arizona Republic
Early-childhood-education and health programs on next month’s ballot could lose millions of dollars if a misplaced decimal point is interpreted technically.
Proposition 203 is built around an 80-cent-per-pack tax increase on cigarettes to pay for the programs. But the ballot language calls for an “.80 cent/pack” tax increase, or 1/100th of what backers say they intended. That’s less than 1 cent per pack.
Backers of the First Things First campaign always have promoted it as an 80-cent-per-pack tax increase. Even opponents have agreed it calls for an 80-cent hike. Proponents say a typo is to blame.
“We think it is very clear and voters understand and read that it is an 80 cents tax on tobacco,” campaign spokesman Steve Roman said.
The folks in the Secretary of State’s Office, who wrote the ballot-format language, agree the increase is 80 cents per pack. To interpret the .80 cents/pack language as 1/100th of the intended amount is a “highly technical” reading of the language, said Kevin Tyne, deputy secretary of state.
The Secretary of State’s Office prepares the ballot format, and the Attorney General’s Office reviews and approves it before it is sent to the printer.
Tyne said no one picked up on the misplaced decimal point during the drafting and review. Nor was it challenged at the 40 town-hall meetings the office has held around the state to explain the state’s ballot propositions.
No one apparently noticed the misplaced decimal point until Tuesday, when a reader called a Republic columnist.
Tyne noted that the full text of Proposition 203 makes it clear the intended tax is 80 cents. For example, there is a reference to the tax being 4 cents per cigarette. At 20 cigarettes per pack, that adds up to 80 cents.
Still, the decimal point could prove troubling, said Ken Behringer of the Joint Legislative Council. He sees the misplaced decimal point as a typo but said it could be all someone needs to challenge the measure in court.
“I could imagine someone might make a challenge to say the ballot has wrong information on it,” he said.
What remained unclear Tuesday was if Proposition 203 passed in the Nov. 7 election, what amount of tax would the state levy: 80 cents per pack or 0.80 cent? It would make a big difference in the cost of a pack of smokes. Arizona’s tobacco tax currently is $1.18 per pack. It also could amount to an estimated cut of $186 million in tax revenues for the early-childhood-education and health programs, according to estimates prepared by legislative budget staffers.
One of the measure’s opponents said it’s one more problem in what he sees as a flawed proposition.
Kevin McCarthy, president of the Arizona Tax Research Association, has criticized the measure for failing to recognize that tobacco revenues will decrease over time, especially with a hefty tax hike, and the loss of revenue will hurt existing programs funded by the state’s tobacco tax.
“I got a good laugh out of it,” McCarthy said of the suddenly smaller tax increase.
Reporter Amanda Crawford contributed to this article.
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Reporter Amanda Crawford contributed to this article.
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First Things First, Citizen’s Initiative Files with more than 200,000 Signatures
June 28, 2006
First Things First, The Early Childhood Development and Health Initiative campaign filed more than 200,000 signatures with the Secretary of State’s office today to qualify for the November ballot. The Initiative will tax tobacco products that will include an 80 cent increase on a pack of cigarettes. This increase will raise approximately $150 million annually for quality early childhood health and educational programs for children zero to five statewide.
“By applying resources to such things as early health, development and literacy programs, we will ensure that all Arizona children have the opportunity to start school ready to learn,” stated First Things First Committee Chairwoman, Nadine Mathis Basha. “This measure creates a fair beginning for Arizona’s children,” she added.
With the advent of innovative science, it has been discovered that 90% of a child’s brain is developed in the first three years of life. During these critical years, young children develop most of their language skills, thought processes, self-confidence, discipline and values.
“First Things First will strengthen K-12,” said Cathy Weflen, a kindergarten teacher in the Madison School District. “I appreciate that the Initiative will require that 90% of the funding be spent directly on programs for young children. This kind of early investment will help us give children the foundation they need to be personally and academically successful in life,” she stated.
“Funds for vision screenings and dental preventative care will help us with the early detection of health issues and learning problems that often require extensive intervention and remediation down the line. We want all kids to be prepared for the classroom experience, and that often hinges on the status of their health and our ability to understand how individual children learn best,” stressed Jackie Forsythe, Vice President of Development for Delta Dental of Arizona.
The Initiative consists of three primary components:
Dedicates in perpetuity a funding stream of at least $150 million statewide for voluntary outcome based early development and health programs at the local and regional level, that will be provided by parents, public, non-profit and faith based organizations. This funding will be collected from a tax on tobacco products.
Funds early childhood programs and additional health, visions and dental screenings to detect children’s health problems early.
The Initiative establishes a delivery system rooted in local communities and ensures 90% of these dollars are dedicated to literacy, health and early educational programs. In addition, this includes stringent public accountability provisions, outcome based standards and audit requirements in order to apply and comply.
“Arizona is poised to become a national leader in ensuring that all children line up at the same starting line of life with the opportunity to reach their full potential,” stressed Basha.
Funds early childhood programs and additional health, visions and dental screenings to detect children’s health problems early.
The Initiative establishes a delivery system rooted in local communities and ensures 90% of these dollars are dedicated to literacy, health and early educational programs. In addition, this includes stringent public accountability provisions, outcome based standards and audit requirements in order to apply and comply.
“Arizona is poised to become a national leader in ensuring that all children line up at the same starting line of life with the opportunity to reach their full potential,” stressed Basha.
