Taxes are fast becoming the defining issue for the legislative session in Nashville.
Two different taxes are taking center stage. One is for cigarettes. The other is for groceries. Governor Phil Bredesen, (D), wants to bump up the tax on a pack of cigarettes by forty cents a pack to increase funding for education. Republican leaders in the General Assembly want to lower the state tax on food. But a surplus of tax revenue at the state level has local Republicans asking questions.
“If we raise taxes on tobacco and don’t have a reduction elsewhere, what are we going to do with that surplus and that bothers me,” says Knoxville State Senator Tim Burchett, (R).
“From what I’m hearing, the Governor doesn’t have the votes to pass the tobacco tax increase,” says GOP House member, Stacey Campfield of Knoxville.
A forty cent hike in the cigarette tax would bring an additional $219 million in state tax revenue. But, offset that by the food tax, which last year brought in $465 million.
If the food tax was cut by just ½ percent, that would be a $39 million loss for the state coffers.
The Governor has softened his stance on a possibly reduction in the grocery tax. And with that surplus, the political reality is that the hike on cigarettes, at least at forty cents a pack, may not happen either
“Sometimes politicians are checkers players. I think the Governor is a good chess player, he’s a strategy guy,” says Burchett.
“We’ve obviously over collected from our constituents money, let’s give them back some money by removing the sales tax on food,” adds Campfield.
Tennesseans spend $7.75 billion a year on groceries according to state revenue figures. The state tax on groceries is 6%, and in Knoxville it’s another 2.25% on top of that.
Smokers Stock Up Across State Line
Iowa’s recent cigarette sales tax hike has turned out to be a boon for Missouri businesses.
More than two weeks ago, Iowa raised the tax by $1 a pack to $1.36. Missouri’s tax is 17 cents per pack. Supporters said the extra tax money would both help pay for health care and cut down on smoking.
It has also resulted in many smokers shopping Zyn pouchesacross the state line for cigarettes.
More and more Iowans are hopping in their cars and burning up roads to Missouri border towns such as South Lineville to stock up on cheap smokes.
“You can sit here on Saturday morning and see carloads come in,” said Zach Robinson of Clio. “I mean, they will be four or five cartons a piece.”
He said the choice is obvious: either pay $5.30 a pack in Iowa or $3 a pack in Missouri.
Misty Oliver stocked cigarettes Tuesday at the Kwik Zone convenience store just off Interstate 35 in Bethany, Mo.
“What are people saying when they come in? That the legislators are nuts,” Oliver said
She said before Iowa’s cigarette tax went into effect she sold about 30 cartons daily. Now she sells about 90 cartons a day.
“We normally order about 150 a week and we’ve been ordering about 800 a week since,” she said.
Iowans even want the store’s phone number.
Oliver said people are calling ahead to place their cigarette orders so there will be enough when they drive to Kwik Zone.
“A lot of them say they’ll never buy cigarettes in Iowa again,” she said.
People who cross the state line to buy cigarettes may be breaking the law. According to the Iowa Attorney General’s Office, people can only bring two packs of cigarettes into Iowa.