Tax: Tobacco Tax Fails

Testimony had ended one recent legislative day on Knudson’s bill to raise the state tax on cigarettes by $1 a pack. A doctor, a dentist, a nurse and a cancer worker had supported the tax. Representatives of smokeless tobacco, retailers and liquor dealers had spoken against it.

“I would just ask the committee to consider the testimony today, which in my mind shows the absolute and utter contempt the cigarette companies have for this Legislature,” Knudson said.

In two hearings on the bill that would boost the state cigarette tax to $1.53 a pack, he said, not a single representative of a major cigarette company had appeared.

“The tobacco companies are so confident of their total and absolute control of this Legislature, they couldn’t be bothered to even testify in connection with this bill,” he finished. “What a message of contempt for our body.”

The tax bill died in committee, as did an identical tax measure on the House side. Earlier in the session, a bill to ban smoking in public workplaces everywhere but designated motel rooms died on the House floor with little debate. Just days after the tax bills fell, a bill to wrest control of tobacco regulation from the Legislature and give it to local governments died in committee.

The network also says South Dakotans pay $483 per household in state and federal taxes to cover smoking-related costs to government. Even some cigarette makers agree that their product is a health risk.

“Cigarettes cause serious diseases in smokers, including lung cancer, heart disease and emphysema,” says the Web site for Philip Morris USA. “Not only does Philip Morris USA recognize that public concern about smoking is legitimate and that calls for additional regulation are well-founded, we support meaningful and effective federal regulation of our products and our industry, as well as reasonable restrictions on public place smoking.”

Reasonable restrictions, of course, are subject to interpretation.

Jennifer Golish, a spokesperson for Philip Morris USA, disagreed that the lack of a formal lobbying appearance on the tax increase proposed in South Dakota supported Knudson’s conclusions about the company’s attitude toward the state Legislature.

Philip Morris USA, she noted, did formally appear on a bill to regulate Internet sales of cigarettes. Registered lobbyist Bill Dougherty of Sioux Falls carried the company’s message that such sales ought to be controlled. The committee hearing on that bill was Friday.

“We do participate in the policy processes at the state and national levels,” Golish said in a telephone interview that afternoon.

The company thinks increasing excise taxes on cigarettes can lead to more Internet sales, which would raise the possibility of avoiding both state taxes and regulations of the product, she said.

As for attempts to limit public smoking, Golish said, “We believe that policy making should be guided by public health … it should be guided by the conclusions of public health officials.”

Because of that policy, the company made a decision not to lobby the issue of restrictions on smoking in South Dakota, she said.

While Dougherty is still representing a cigarette company, some other tobacco groups that once paid lobbyists to track legislation in Pierre aren’t registered this year. Jeremiah Murphy of Sioux Falls has been registered in past years with firms that included Brown & Williamson and RJ Reynolds. This year he didn’t get a contract.

“They made business decisions, as most businesses do, about where their resources can be used most effectively,” Murphy said. “I wasn’t hired.”

Retailers, liquor dealers and others carried a message that benefited the tobacco companies, though. If the argument is that business should regulate itself, or that a tax increase doesn’t make sense, it probably matters little whether the argument is being made by a tobacco maker or a general business advocate.

Advocates of this year’s attempt to ban nearly all workplace smoking were buoyed by their success three years ago in passing a ban on most public smoking. Conveniently forgotten in the victory is that the bill in 2002 started out as nearly a total ban. Before it passed, exceptions had been carved for video-lottery businesses, as well as for bars and restaurants that served alcohol.

Even with the compromises, the measure was a skin-of-the-teeth victory in the Senate, 18-17. Had one more senator been swayed to oppose the measure, it would never have been before the House for its 40-26 vote, which is four more than the 36 needed for passage.

Lobbying on both sides of the tobacco control issue was intense but fair this year, said freshman Republican Rep. Mike Vehle of Mitchell.

“I didn’t think it was so bad,” he said. “They each presented their issues pretty forcefully. They wanted to talk to me. But, in the end, every one of them said, ‘Just vote your conscience.’ “

He voted to kill the smoking ban when the House considered it.

That might have been what Gov. Mike Rounds would have done had he still been in the Legislature. Rounds, whose budget message emphasized the pressure of Medicaid on state spending, isn’t a fan of mandates to sway behavior like smoking, he said in an interview. He understands, he said, the part tobacco use plays in health-care costs.

“It isn’t that we don’t recognize the impact of smoking on Medicaid budgets, because smoking impacts all health-care budgets,” Rounds said in an interview. “But most of the issues upstairs are issues of mandates. I’m still of the opinion that mandates are the last resort, and I prefer to do things on a voluntary basis.”

The governor said he thinks his attitudes about tobacco use represent those of many South Dakotans. He avoids places that allow smoking when he can, hates the smell of smoke on his clothing, but recognizes that the product is legal for adults.

“In this case, for the most part, you get more out of incentives than mandates,” he said.

He didn’t have his staff or cabinet secretaries weigh in on the tax increase bills. He said he didn’t want people suggesting it was “an underhanded way for me to raise taxes. It isn’t.”

When he said told legislators that his budget proposal included no new taxes, “I didn’t want anyone to suspect that I was looking for someone else (to raise taxes) as another way around that.”

What if legislators had sent him a tax increase on cigarettes?

“If the Legislature decided that they, in terms of social issues or policy points, wanted to make sure they impacted cigarette smoking by taking it out of existence, I’d take a hard look at it,” Rounds said. “Once I saw what form it was in, I’d look closely at it.”

The conversation in Knudson’s committee over the $1-a-pack tax increase shows the division of thinking. A motion to pass the bill died 3-6.

“What it comes down to me, personally, are we picking on tobacco users? The answer is certainly yes,” said Sen. Ben Nesselhuf, D-Vermillion. “Do tobacco users cost us millions and millions of dollars? Again, the answer is certainly yes.”

He voted for the tax.

Sen. Clarence Kooistra, R-Garretson, said he didn’t favor the tax.

“If this were a complete ban on smoking or a smoke-free enforcement, I would vote yes in a heartbeat,” he said.

He voted against the tax.

So did Sen. Jim Lintz, R-Hermosa, a no-vote all the way.

“I don’t sign no-tax pledges, I believe it’s our duty to tax people of South Dakota for services,” Lintz said. “What I don’t believe in is engineering social policy to pass this. I don’t want to tell someone they can or can’t do something by forcing a tax on them.”

Rounds says he thinks perceptions about the power of the tobacco lobby are based on personal attitudes toward the product.

“If you asked a majority of South Dakota people, they’d base their reply on whether they thought smoking should be allowed,” Rounds said. “I think the Legislature in most cases represents the majority of people across South Dakota.”

Two years ago, when he fought with legislators for a 30 cent increase in the tobacco tax as part of a budget-balancing package (they compromised at 20 cents), Rounds said he didn’t believe tobacco had any redeeming social value.

“I still don’t,” he said last week. “I just see this issue as a regular discussion that comes up, a policy statement that the Legislature will take on the debate regularly. It would appear this year the Legislature decided they’re not going to address it.”

The Tobacco-Free Network, and some legislators, have criticized Rounds for failing to include in his budget $750,000 for tobacco prevention programs. The money was there last year.

“It should be restored,” said Rep. Mary Glenski, D-Sioux Falls. “Whatever we can do to stop smoking is worth the money. I was disappointed in that part of the budget.”

Health Secretary Doneen Hollingsworth told the Appropriations Committee early in session that the funds Glenski questioned came from a trust fund. She said Rounds wanted the Legislature to decide each year how to spend that money. And, Hollingsworth said, the state budget includes $1.8 million for tobacco cessation programs such as the quit-line for callers seeking help kicking the habit.

Mike Bales of Blunt doesn’t think much of the telephone help-line. He’s 43 and trying to quit the habit.

“They call and say ‘How are you doing today?’ and what good does that do me?” Bales said in an interview. “Have another stick of gum, they tell me. It just made me mad.”

Rounds said smoking, along with health issues such as obesity and diabetes, will be targeted in a Healthy South Dakota initiative he plans to roll out this spring. If the state can encourage people to stop using tobacco, health-care costs will be impacted, he said. Of state spending on such efforts, he said, “You can only reasonably spend so much money in a fiscal year.”

He also said a forced program could cause a backlash, turning people off of other parts of the healthy lifestyle initiative.

“It’s not going to happen by threatening people or by mandate,” Rounds said. “It’s something that people literally have to buy into, to recognize. We’re doing everything we can to help them recognize it.”