Friday, March 21, 2003
House Passes 70-Cent Cigarette Tax Hike
By David Miles
Journal Capitol Bureau
SANTA FE The House on Thursday approved a bill to raise cigarette taxes by 70 cents a pack, apparently removing the final revenue hurdle to Gov. Bill Richardson's signature of a state budget measure.
Richardson this week threatened to veto the $4.1 billion state budget bill sent to him by legislators if they failed to approve the cigarette tax increase and a proposal to free up more tobacco settlement revenues for general government spending.
Legislators on Wednesday sent the Democratic governor a bill (SB 298) to divert New Mexico's share of revenues from a multistate settlement with tobacco companies to the state's general fund for the next four budget years.
The amount is estimated to be about $40 million a year. Half of the tobacco settlement money currently goes into a permanent investment fund and the other half goes to health care and education programs.
Richardson on Thursday said he plans to use a line-item veto on parts of the budget that he thinks are wasteful. But the governor also said the measures to divert tobacco settlement revenues and raise the cigarette tax were acceptable to him and would help balance the budget.
The tobacco tax increase, which the House approved on a 35-31 vote, returns to the Senate for consideration of House changes. The Senate is expected to approve.
The measure, whose chief sponsor is Senate Majority Leader Manny Aragon, D-Albuquerque, would raise the tax on cigarettes from 21 cents to 91 cents a pack.
The cigarette tax bill is expected to generate an estimated $47 million a year in revenues to the state. It would include $9.5 million a year to repay bonds to be issued for additions and improvements at the University of New Mexico Health Sciences Center and $4 million a year to repay bonds to fund capital improvements at Department of Health buildings.
The measure also would earmark an estimated $10.4 million a year to repay the bonds in case revenues from tobacco taxes decline. The remainder of the estimated revenue from the tax increase $23.1 million a year would go to the state's general fund.
House Speaker Ben Lujan, D-Santa Fe, said he expected that most of the general fund share of revenues would be used to help offset rising Medicaid costs. He and other legislators argued that higher cigarette prices would deter New Mexicans from smoking.
But Rep. Dan Foley, R-Roswell, said the higher tax would simply drive smokers to buy their cigarettes elsewhere, such as from the Internet. New Mexico would see its revenue from tobacco taxes decline as a result, Foley said.
Foley cited the example of his mother, who is hospitalized after a surgery to remove two brain aneurysms, which Foley said were related to smoking.
"I've watched my mom drive two hours to buy a carton of cigarettes," Foley said.