Capitol Report

State Representative Danny Carroll

April 7 2005

Much has been said about an increase in the cigarette tax in Iowa.  There seems to be a great deal of public support for an increase.  Currently Iowa taxes cigarettes at the rate of 36¢ per pack.  Our neighbors have the following rates: Missouri – 17¢, Nebraska – 64¢, Minnesota – 48¢, Illinois – 98¢, South Dakota – 53¢ and Wisconsin - 77¢.  Governor Vilsack has proposed increasing Iowa’s tax by 80¢ putting our state at $1.16 per pack.  His budget proposal to the legislature and supported by House and Senate Democrats, would simply deposit the increased revenue from the cigarette tax into the state general fund.  It would not be reserved specifically for health care or Medicaid.  To be sure, the Governor and fellow Democrats do support an increase in spending for health care but their additional spending priorities depend on the cigarette tax.  Republicans have put forward a state budget that pays for increases in health care, education and other state programs without depending on the cigarette tax.

Let’s be honest about one thing.  The proposed increase is due in large part to the fact that a cigarette tax causes the least public objection.  There is research to support the idea that an increase in price will discourage smoking, but the main reason is that it is an “easy tax” to raise.

The situation is interesting.  I believe there are sufficient votes in both the house and senate to pass an increase in the cigarette tax.  However, there are wide differences of opinion as to how it should be spent.  If the increase in revenue is simply deposited into the general fund there may not be votes to pass the increase.  Many members have said they would only vote for an increase if the money was used only for health care.

My position is that the tax, if increased, should be collected and not spent for the first year and deposited into the Senior Living Trust Fund.  It would then be available for health care needs when the legislature returns next January.  This would avoid the possibility of spending more than the tax actually brings in.  In addition, we will have a better idea of what the needs in health care are when we are closer to the start of the next budget year.

The issue should be decided one way or the other in the next three weeks.  Adjournment is scheduled for April 29^th.