Higher National Cigarette Tax Could Can State Increases

A proposal in the U.S. Senate would tack an extra 61 cents onto the federal excise tax on cigarettes. The additional revenue would fund an expansion of the state Children's Health Insurance Program, which insures millions of children whose low-income families don't qualify for Medicaid.

State lawmakers raised the cigarette tax from 5 cents to 30 cents a pack in September 2005, and another nickel was tacked onto the tax a year ago. Still, the state tax ranks 45th in the U.S., where the average cigarette tax is $1.07 per pack.

State Sen. Ellie Kinnaird, D-Orange, has backed cigarette tax increases in the legislature before, but she said a major national tax increase would dampen support among lawmakers for another state increase.

"I think it is unlikely if Congress does what they are threatening to do," Kinnaird said. "We could kill the goose that laid the golden egg. I mean, if we overtax to the point where people aren't smoking -- now that's an irony isn't it?"

State Rep. Hugh Holliman, D-Davidson, said higher taxes could have an adverse economic impact in a state that still grows plenty of tobacco and manufactures countless cigarettes.

A recent study by the North Carolina Division of Public Health and the North Carolina Department of Revenue showed cigarette sales statewide dropped by 18.5 percent in the year after the tax was raised. But the revenue raised by the tax increased.

"We're certainly sensitive to the fact that what we're doing has an impact on the jobs around the state that are still involved in tobacco growing or tobacco manufacturing," said Holliman, the House majority leader.

But Holliman, a former smoker, said paying for rising health care costs would be a primary reason lawmakers could look to raise the tax again.

"We are all concerned that the health aspects of cigarettes are certainly one that we're having to pay the tab on," he said.