Assembly debates tobacco, liquor tax hikes despite veto threat

CARSON CITY -- Despite Gov. Brian Sandoval's vow to veto all tax increases, legislators launched debates Tuesday on bills to raise taxes on tobacco and liquor.

The higher "sin taxes" would add at least $125 million a year to state coffers, they contend.

"I believe this state will be devastated if we do not raise revenue," said Assemblywoman Peggy Pierce, D-Las Vegas. "The paramount issue to me is (that) we save this state."

In a morning hearing before the Assembly Taxation Committee, Pierce urged approval of Assembly Bill 333, which would more than double the cigarette tax to $1.70 a pack and raise taxes on cigars, beer, wine and liquor by 25 percent or more.

Nevada's current tax of 80 cents per pack ranks 35th in the nation, compared with a $1.45 average for all states. The tax is $2 in Arizona, $1.70 in Utah and 87 cents in California.

Pierce said Golden State legislators probably will increase the tax by $1 this year.

In the afternoon, the Senate Revenue Committee members heard Senate Bill 386, which would put a $2 per pack tax on cigarettes and double the tax on cigars.

The first hearings on tax increases came on the 58th day of the scheduled 120-day legislative session.

"The governor has been clear; no new taxes," said Sandoval's press secretary, Mary-Sarah Kinner.

And Republican legislators remain united against tax increases.

Without at least some Republican support, Democrats remain a few votes short of the two-thirds majority needed to increase taxes and override a governor's veto.

No action was taken on either bill Tuesday.

Democrats are not likely to challenge Sandoval until near the end of the session, when they have finished closing the state budget and have decided how much more revenue is needed.

Sandoval's proposed $5.8 billion budget is $400 million less than current spending, but the Democrats have contended his budget is as much as $2.5 billion short of the real needs of education, social services and other programs.

Kinner reiterated that Sandoval will not support cigarette tax increases, no matter what they are called.

Another "no new taxes" advocate, former Minnesota Gov. Tim Pawlenty, helped balance his state's budget by imposing a "health impact fee" on cigarettes.

The idea that Nevadans' health would be improved if cigarette taxes were increased was the overriding theme of the testimony in the Tuesday tax hearings.

Beverly May, lobbyist for the Campaign for Tobacco Free Kids, called on senators to approve a higher "health impact fee." May said the higher fee would prevent 21,800 Nevada children from smoking.

"The only reason to oppose it is to keep kids addicted," she said.

Each 10 percent increase in cigarette prices would lead to a 4 percent decrease in smoking, said Jennifer Hadayia, program manager for the Washoe County Health District.

She also noted that 22.2 percent of Nevada adults smoke, ninth highest in the nation, and 10.2 percent of children ages 12 to 17.

"It is a win for health and a beneficial win for the state's deficit," added Tim McCoy, an American Cancer Society representative.

But Assemblyman Ed Goedhart, R-Amargosa Valley, said that if the goal of the legislation is to deter people from unhealthy habits through tax increases, then supporters also should "charge more for hamburgers."

Obesity is the No. 1 health problem, he said.

Cigar store owner Michael Frey testified that he will close four of his six cigar stores in Las Vegas and lay off 30 workers if the tax increases of $1.50 to $3 per premium cigar are approved.

The Assembly bill would raise the tax on cigars from 30 percent to 55 percent of their wholesale price.

That will drive cigar smokers to purchase untaxed cigars over the Internet, Frey said.

Goedhart added that "with a few clicks of my mouse," he found several websites selling cut-rate cigars and cigarettes. He said the plan to collect more money in tobacco taxes might backfire.

Keith Lee, lobbyist for the Distilled Spirits Council, argued that the higher liquor taxes would be paid by consumers, a third of whom earn less than $50,000 a year.

He also contended that the tax would cost 400 Nevadans their jobs.

But Assemblywoman Dina Neal, D-North Las Vegas, said that the "flip side" is that alcohol consumption has a negative effect on families and that distributors try to market to poorer people.

Contact Capital Bureau Chief Ed Vogel at evogel@reviewjournal.com or 775-687-3900.