Assembly panel hears arguments over tobacco tax hike bill

CARSON CITY — A bill making permanent a package of sunset taxes and raising cigarette taxes is being counted on to raise $996 million over the upcoming two-year budget cycle.

State Budget Director Jim Wells told members of the Assembly Taxation Committee on Tuesday that Senate Bill 483, the so-called “sunset bill,” is included in Gov. Brian Sandoval’s $7.2 billion two-year spending plan.

Most of the discussion focused on Sandoval’s proposal to raise cigarettes taxes by $1 a pack to $1.80. Fiscal analysts say the tax would bring in $348 million, of which $192 million would be new revenue.

Representatives from health advocacy groups urged committee support, saying the higher tax would help or force people to kick the tobacco habit. The American Cancer Society estimated the tax increase would mean a 13 percent decline in youth smokers and spur 15,400 adults to quit. The nonprofit projected it could prevent 7,200 premature deaths from smoking-related illnesses and long-term health-care cost savings of $475 million.

But some lawmakers questioned targeting smokers to raise revenue.

“I’m not at all sympathetic to the call for a greater tax on tobacco,” said Assemblyman Pat Hickey, R-Reno.

Hickey said he’s “struggling” with the amount of increase proposed, and said it’s ironic the state, while wanting people to quit, is relying on them to fund a big chunk of state government.

Tobacco company lobbyists questioned the state’s revenue projections and said it amounts to a tax on a select group of citizens.

“This is a constituent-based tax,” said Sam McMullen, a lobbyist for Altria, the parent firm of Philip Morris. He told lawmakers that approving the tax is “saying you want to take $100 million a year out of the pockets of your constituents.”

Joe Guild, another Altria lobbyist, called revenue projections “speculative at best.” Of 33 states that have raised cigarette taxes over the past decade, he said, only four met revenue projections.

Both Guild and McMullen also said tat many Nevada smokers might travel out of state to buy cigarettes, or purchase them at Indian smoke shops, where any tax money would go to tribal governments — not state coffers.

Besides higher cigarette taxes, SB483 also would keep intact a 0.35 percent sales tax increase that supports schools and makes permanent the 1.17 percent payroll tax paid by non-financial institutions. Higher fees attached to vehicle registrations also would remain.

The measures were first enacted in 2009, when Nevada was crushed by the recession, unemployment soared and state coffers dried up. Though initially set to expire, or “sunset,” in 2011, the taxes have twice been extended, and Sandoval has called for making them a permanent state revenue stream.

The sales tax portion would generate $377 million for schools. The rest would go to the state general fund. But some provisions are in contrast to another tax measure, Assembly Bill 464, which proposes raising payroll taxes even higher, to 1.47 percent, and rolling back levies on car registration levies.

Those differences will have to be reconciled, depending on what lawmakers eventually pass with less than a week to go before a June 1 adjournment.

SB483 was approved by the Senate 18-3 on May 15.

The Assembly Taxation Committee took no immediate action on the bill Tuesday, but could vote on it today.

Contact Sandra Chereb at schereb@reviewjournal.com or 775-687-3901. Find her on Twitter: @SandraChereb.