$1-per-pack hike in cigarette tax would create state cancer fund
A proposal to raise Washington’s cigarette taxes by $1 a pack to fund a $1 billion anti-cancer fund may be headed to the November ballot.
Seattle Times political reporter
Top state cigarette-tax rates (per pack)
1. $4.35 – New York
2. $3.51 – Massachusetts
3. $3.50 – Rhode Island
4. $3.40 – Connecticut
5. $3.20 – Hawaii
6. $3.03 – Washington
7. $2.83 – Minnesota
8. $2.70 – New Jersey
9. $2.62 – Vermont
10. $2.52 – Wisconsin
Source: Federation of Tax Administrators
Washington voters might be asked this fall to boost the state cigarette tax by $1 a pack to create a $1 billion cancer research and prevention fund.
Backers of Initiative 1356, including former Gov. Chris Gregoire and the Fred Hutchinson Cancer Research Center, have been working behind the scenes for more than a year to craft a proposal and line up support for a possible vote in November.
Supporters say the measure would be a triple win for the state — funding cutting-edge cancer research, boosting the economy and discouraging smoking.
But State Treasurer Jim McIntire is raising concerns about borrowing that would be authorized by the initiative, and says the measure also could crimp the state’s general-fund budget, most of which goes to schools.
The proposal also likely would face opposition from the tobacco industry, which spent $50 million to kill a similar plan in California two years ago.
Sandeep Kaushik, a spokesman for the I-1356 effort, said supporters expect to decide within a couple weeks on whether to go ahead this year. “Obviously, there is significant interest in it,” he said.
The Hutch and Seattle Children’s each have pledged $500,000 to the initiative campaign, according to a report filed this week with the state Public Disclosure Commission. Gregoire, a breast-cancer survivor who joined the Hutch board last year, is chairing the campaign. As state attorney general in 1998, she helped negotiate a $206 billion settlement with tobacco companies on behalf of 46 states.
To qualify for the November ballot, the initiative campaign would need to submit 246,372 valid signatures of registered voters by July 3 to the Secretary of State’s Office.
In addition to raising Washington’s current $3.03-per-pack cigarette tax — already the sixth-highest in the nation — by $1, the initiative would increase taxes on cigars, chewing tobacco and other tobacco products by 10 percent.
Backers estimate that could generate up to $1 billion over a decade. To raise cash up front, the state would sell up to $1 billion worth of bonds against that tax revenue and direct 60 percent of the cash raised to research, 20 percent to prevention programs, including anti-smoking efforts, and 15 percent to treatment. Up to 5 percent could be used for administrative costs.
The money would be paid out in grants to public and private research organizations — including commercial entities — with proposals screened by scientific-review panels. The measure calls for independent audits at least every three years.
Cancer is the leading cause of death in Washington, according to the state Department of Health.
Dr. Larry Corey, president and director of the Hutch, said in a statement the initiative would “reduce cancer rates, provide more effective and less toxic cancer therapy ... and invest in proven prevention programs to keep kids from smoking and get everyone the early detection and screening they need.”
Corey and other supporters point to cuts in federal research grants, and note that other states, including Oregon and Texas, have launched ambitious campaigns to boost cancer-research funding.
McIntire, the state treasurer, said he supports efforts to boost cancer research, but questioned I-1356’s use of tobacco taxes and its reliance on borrowing. “It would use debt to finance operating expenditures, which is contrary to state financial policy,” he said.
McIntire also worries about the initiative’s impact on the general-fund budget, which receives cigarette-tax money. If high prices cause smokers to quit, or flee to the black market, state revenue could drop.
Legislators already face a Supreme Court order to increase public-school funding by billions.
I-1356 would prevent any budget impact for the first three years by directing the state to hold the general fund harmless even if tobacco-tax collections decrease.
But once that protection fades, McIntire said, “my concern is that there is an impact on the general fund that is not insignificant.”
Kaushik responded, “If there is any impact on state revenue, it will be because the rates of smoking in Washington are going down because of this initiative — and that’s a good thing.”
An association of grocery-store owners in Washington has filed a challenge to the I-1356 ballot title — the short description that would appear on voter ballots. The grocery groups say the description should explicitly mention that the initiative raises cigarette taxes by $1 and that it would authorize $1 billion in bonds.
The initiative makes no mention of tribal smoke shops. Most tribes in Washington collect a tribal cigarette tax equal to the state tax. The money is kept by the tribes. The Puyallup tribe has an agreement with the state for a lower tax rate, but shares 30 percent of the revenue with the state.
Washington last raised the cigarette tax by $1 in 2010. The state raked in $450 million in tobacco and cigarette taxes last fiscal year, down from $471 million in 2012.
Cigarette taxes in neighboring states are much lower — $1.31 a pack in Oregon and just 57 cents in Idaho.
Like other states with comparatively high cigarette taxes, Washington has seen an upsurge in sales of untaxed, black-market smokes.
In 2012, nearly half the cigarettes consumed in Washington were smuggled in from lower-cost states, according to a March report by the Tax Foundation. That was the fourth-highest rate of smuggling in the nation.
The highest rate of cigarette smuggling — 56.9 percent — was in New York, which has the highest state cigarette tax at $4.35 a pack.
Jim Brunner: 206-515-5628 or email@example.com. On Twitter @Jim_Brunner