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Taxes on cigars, chewing tobacco could be doubled

While Republicans in the state Senate were successful in cutting a proposed cigarette tax in half last week, they also succeeded in doubling the tobacco tax on cigars, chewing tobacco and snuff.

Last week, the Republican-controlled Senate Finance Committee amended a Gov. Phil Bredesen-backed bill, slicing Bredesen's proposed 40-cent cigarette tax increase in half to 20 cents per pack.

But the amendment doubled the wholesale tax on other tobacco products such as cigars and chewing tobacco from the current 6.6 percent to 13.2 percent.

For example, if a retailer bought $100 worth of tobacco products from a wholesaler, the retailer would pay $13.20 in taxes, said Sophie Moery, spokeswoman for the Tennessee Department of Revenue. Retailers would likely pass that tax onto their consumers.

Sen. Bo Watson (R-Hixson), who sponsored the modified tobacco tax increase, said he wanted to double the tax on other tobacco products to expand the tax beyond simply singling out cigarettes.

"So we get the tax to 20 cents, but it broadens it across all tobacco products rather than just the one single product," Watson said.

Doubling the wholesale tax on other tobacco products is estimated to bring in an additional $9.1 million annually.

That $9.1 million would come on top of the $120 million that the 20-cent cigarette tax increase is estimated to raise, making the total amount of revenue taken in from the Republican amendment to nearly $130 million.

Bredesen's proposed 40-cent cigarette tax hike is estimated to raise about $220 million, which he proposes be spent on K-12 and higher education as well as agricultural enhancement grants.

Bredesen did not propose doubling the tax on other tobacco products.

Sen. Joe Haynes (D-Goodlettsville), the chairman of the Senate Democratic Caucus, said he "doesn't have any objection" to increasing the tax on the other types of tobacco in addition to a cigarette tax hike.

"I'm OK with raising taxes on both of them," Haynes said.

Senate Speaker and Lt. Gov. Ron Ramsey (R-Blountville) has said he will not let the bill to increase the cigarette tax and double taxes on other tobacco products to have a full Senate vote until after the House and Senate pass Bredesen's proposed education changes tied to a school accountability package.

But between now and then, the Republicans will have to find another bill to double the taxes on tobacco products besides cigarettes.

Unbeknownst to Republicans last week, the bill to increase the tax on cigarettes could not legally double the tax on other tobacco products.

That's because the cigarette tax bill, as it was written, did not address the part of the law dealing with taxes of other tobacco products.

"So we see how we handle that when we get to the floor," Watson said, adding that doubling the tax on other tobacco products may have to be added to another bill.

Source: Nashville City Paper