Budget panel OKs cigarette, business tax increase

cigarette smoke

A budget committee on Wednesday approved more than $100 million in tax increases — including a 25 cent per pack increase in cigarette taxes — that are part of a House GOP plan to address a looming state budget shortfall.

The House Ways and Means General Fund Committee approved the bills in rapid fashion with little debate, the day after House Republicans announced support for a mix of $151 million in taxes and fees combined with various cost-cutting measures.

“We haven’t presented anything that is broad-based. It’s pretty targeted,” Committee Chairman Steve Clouse, a Republican of Ozark, said after the meeting. Clouse said House members thought it their responsibility to try to address the budget problem even though Senate support for their ideas is unclear.

Republicans’ budget solution is largely dependent on bills sponsored by Democrats.

A bill by Democratic Rep. Patricia Todd of Birmingham would raise the raise the cigarette tax by 25 cents per pack. The increase would generate an estimated $60 million.

The second largest revenue generator is a bill by Rep. Elaine Beech, a Chatom Democrat, that would raise the business privilege tax for large businesses. The bill would do away with the tax on about 107,000 small businesses but increase the maximum tax on larger businesses. The change would bring in an estimated $39 million.

The bills are expected to come up for debate Tuesday in the full House of Representatives. “I’m sure there will be vigorous debate from all sides,” Clouse said.

Gov. Robert Bentley has argued that nothing less than $541 million in new revenue is needed to address the state’s budget problem.

Bentley on Tuesday said he applauded House members “for agreeing with me that tax increases are needed to address the revenue shortfall in the General Fund.” But he said the House proposal raises only a fraction of the amount needed.

Clouse said he thought the House proposal was “fairer.” Bentley’s proposals included raising the cigarette tax by 82 cents per pack and increasing the sales tax on cars from 2 percent to 4 percent. “It was just too much. You talk about a $30,000 vehicle, just for the average person that’s $600,” Clouse said.

The committee also approved bills to raise the tax on automobile rentals from 1.5 to 2 percent. The change would raise an estimated $6 million. Another approved bill would increase the title fee on automobiles from $15 to $25. The change would raise an estimated $14 million.

The only contentious debate came as Democrats criticized a proposal to require two furlough days for state employees next fiscal year.

Montgomery Rep. John Knight, a Democrat, said he was not for balancing the budget “on the backs of poor state employees.”

Beech said if lawmakers require that, they should also cut their own pay by two days.

Part of the House Republican budget solution took an initial stumble out of the starting gate Wednesday morning.

The House Ways and Means Education Trust Fund Committee on Wednesday rejected a bill that would change the state tax on lubricating motor oil.

The bill would replace the current excise tax of a flat 6 cents per gallon with the state’s 4 percent sales tax. It is expected to bring in $10 million of the $151 tax package.

A second committee meeting was quickly called for Thursday morning.

“I think there was a probably a misunderstanding about the actual numbers involved there so that will be back up in committee tomorrow,” Clouse said.

Republished with permission of The Associated Press.