House lawmakers give initial approval to tax package
BOSTON—House lawmakers on Thursday gave initial approval to a package of tax hikes, including a dollar increase on a pack of cigarettes and a series of business tax loophole closings -- the first major tax package since 2002.
The cigarette tax would generate an estimated $175 million and would go into effect in July if the bill becomes law. It sparked some of the sharpest exchanges during the hours-long debate on the floor of the House.
Backers said the cigarette tax would not only bring in needed revenue with the state facing a $1.3 billion budget gap, but would also sway some young people against taking up the habit -- and encourage older smokers to quit.
"Smoking kills you. It compromises your health and it kills you. It's something we have to be mindful of," said Rep. Rachel Kaprielian, D-Watertown, a supporter of the bill.
An amendment approved during the debate would dedicate the revenues of the cigarette tax to health care to help ease financial pressure on the state's landmark health care law, which is struggling with a larger than expected enrollment.
Critics said they agreed smoking is bad, but said hiking taxes doesn't make any sense in the face of a looming recession.
They also the new tax would increase the cost of a carton of cigarettes to about $68 dollars -- compared with about $33 in New Hampshire -- and would send smokers fleeing over the border.
Rep. Colleen M. Garry, D-Dracut, said the bill could end up killing mom-and-pop stores in her district.
"It's less then a mile from the New Hampshire border," she said. "What happens to the jobs and what happens to the businesses in my district?"
Others said it's unfair of the state to put so heavy a tax burden on a narrow class of people -- particularly since those backing the law agree that nicotine is addictive.
Rep. George Peterson, R-Grafton, is a former smoker and said he knows how hard it is to quit. He said a person with a two-pack-a-day habit will end up spending an additional $720 a year under the bill.
"It is an addiction. It is extremely difficult to overcome," he said.
Rep. Peter Koutoujian, D-Waltham, said the per-pack cost is even higher for state taxpayers footing the bill for smoking-related illnesses. He said the federal Centers for Disease Control estimated that the state spends $3.5 billion a year on smoking-related diseases.
That translates into more than $19 per pack in health costs for taxpayers, said Koutoujian, who supports the bill.
Lawmakers made some changes to the business portion of the bill before approving it.
The initial version of the bill softened the impact of the loophole closings by mandating a gradual cut in the corporate income tax rate over several years down to 7 percent.
The final bill wouldn't cut the tax rate quite as deeply -- stepping down to 7.5 percent over several years -- and would link the individual cuts to minimum annual gains in corporate tax revenues.
The changes bring the bill closer to Gov. Deval Patrick's version, which cuts the rate to 8.3 percent.
House Speaker Salvatore DiMasi said the bill would increase revenues and reduce the tax burden on businesses.
"We will soon take up the other key portions of my balanced budget plan, difficult cuts of at least $100 million, savings and efficiencies in state government and modest use of our stabilization fund," DiMasi said.
Republicans objected to the loophole closings, calling them a business tax hike by another name.
"We are not only losing jobs, we are losing population and you want to raise taxes on business?" said Rep. John Lepper, R-Attleboro. "Is that sensible?"
The loophole closings are estimated to produce about $217 million for the fiscal year starting in July.
The bill still needs the approval of the Senate and Gov. Deval Patrick's signature.
Senate President Therese Murray has said the Senate firmly backs the cigarette tax hike and Patrick said he's also supportive of both the cigarette tax and the loophole closings, but wants to see the final version of the bill before saying whether he'd sign it.
