Cigarette tax hike proposal burns business

By Jessica VanderKolk, jvanderkolk@altoonamirror.com
While a legislative conference committee works out a bill to ban smoking in public places, a local business has concerns about the tax on cigarettes and other tobacco products.

After a House and Senate impasse over a bill to ban smoking, a conference committee will create a bill for both chambers to vote on. Whether that bill emerges before the end of the year remains to be seen.

Owners of Blair Candy Co. in Altoona don’t dispute that smoking is bad for a person’s health, but they disagree with the state’s tax on cigarettes, which Go. Ed Rendell raised from $1 to $1.35 at the end of 2003 and hopes to increase again this fiscal year. The business sells tobacco products wholesale and retail.

“Everyone says when everybody quits, we won’t need that money, we’ll no longer need to fund the hospital bills for all these people that are smoking,” company President Pat Dandrea said.

“The cigarette smokers that pay taxes are funding things for everyone, not just smokers,” Dandrea said. “If we stop the smokers, where’s the money coming from?”

The state cigarette tax funds the Children’s Health Insurance Program, a farmland preservation fund and a medical malpractice insurance fund, but most of the money — 75 percent of it in 2006-07 — goes into the state’s general fund.

‘‘As far as trending goes, without an increase in the tax, that will continue to trend down as it has been doing,’’ said Elizabeth Brassell, Department of Revenue spokeswoman.

While the amount of cigarette tax revenue decreases, the state also is owed about $9.3 million in cigarette and $1.1 million in sales and uses taxes Pennsylvanians are to pay when they purchase cigarettes online from companies outside Pennsylvania.

The state sent more than 4,300 letters and tax forms this spring to purchasers who owe the tax in an attempt to collect. Federal law requires vendors that ship cigarettes to another state to release purchase information to state taxing authorities.

Rendell hopes to see tobacco tax increases he called for in his 2007-08 budget to help fund his health care plan. He would raise the cigarette tax 10 cents, from $1.35 a pack to $1.45, which would bring in $49 million. A tax of 36 cents an ounce of smokeless and loose tobacco and 36 cents per 10 cigars or cigarillos, would garner $27.8 million.

Pennsylvania is the only state with no tax on smokeless tobacco products.

As a wholesaler, Blair Candy pays the state tax upfront, nearly $3 million a year. That does not include the 6 percent sales tax imposed on cigarettes.

‘‘It’s going down, what we’re taking in, because people are smoking less, but the state has also raised that tax over the last so many years,’’ Dandrea said. ‘‘The argument that we’re raising the tax so everybody will quit, it’s a fallacy. If you want people to quit, just make them illegal for everyone.’’

Dandrea said cigarette thefts occur, and his company has had two in 70 years — both after a tax increase.

‘‘They’re easy to steal and sell,’’ he said. ‘‘The evidence is gone in two weeks. If they’re stolen at retail, the state is already paid.’’

‘‘We’re paid last,’’ Blair Candy Vice President Terry Dandrea said.

Rendell spokesman Chuck Ardo said the state chooses to increase the cigarette tax to fund state programs because it affects a small segment of the population. According to state Department of Health statistics, 23 percent of Pennsylvania adults smoke, or about 2.2 million.

‘‘And certainly, anything we can do to discourage smoking is a good thing,’’ Ardo said.

As people quit smoking and the state receives less tax revenue, Ardo argues that the health care savings would make up the difference.

‘‘The health care cost savings from providing health care for smokers that would be realized from a significant decline in smoking would more than compensate for whatever we might lose in cigarette tax revenues,’’ he said.

But Ardo admitted that the state has not had as significant a downturn in health care costs as it wants.

Blair Candy Controller William Ajay said the business isn’t against government programs, but he doesn’t want to see one product beaten with taxes.

‘‘Fast food — they’re starting to demonize that. It’s just a matter of time,’’ Ajay said.

Pat Dandrea agreed that fast food and other products may be next on the list of items to tax when the state needs money.

‘‘Then they’ll come after glasses and lawnmowers,’’ he said. ‘‘It hits everyone. Look out on your cheeseburger at McDonald’s next year because they must get the money somewhere.’’

Mirror Staff Writer Jessica VanderKolk is at 946-7465.