Jackson Free Press

Following is Gov. Haley Barbour's statement today vetoing the popular effort to raise the tax on cigarettes and lower the tax on on groceries. Note that he is repeating his past statement about the effect the tax-switch would have on local governments—even though his allegations on that front are disputed by the State Tax Commission. As quoted in Adam Lynch's report this week on this issue:

The State Tax Commission refuted Barbour's argument depicting the "tax cut" as an actual tax hike. The bill would cut grocery tax revenues by $172.5 million in fiscal-year 2008, but bring in $181.5 million that same year. The bill would also impose a fee on non-settling cigarette manufacturers estimated to generate an extra $17 million in fiscal-year 2007.

Nevertheless, here are Mr. Barbour's veto comments, verbatim ...

TO THE MISSISSIPPI STATE SENATE:

I am returning SB 3084: "AN ACT TO AMEND SECTION 27-69-13, MISSISSIPPI CODE OF 1972, TO INCREASE THE EXCISE TAX ON CIGARETTES; TO AMEND SECTION 27-65-75, MISSISSIPPI CODE OF 1972, TO INCREASE THE PERCENTAGE OF SALES TAX COLLECTED ON RETAIL SALES OF SUCH FOOD WITHIN MUNICIPALITIES THAT IS DISTRIBUTED TO MUNICIPALITIES, AND TO REQUIRE A PORTION OF THE MONTHLY TOBACCO TAX REVENUE TO BE DEPOSITED IN THE EDUCATION ENHANCEMENT FUND AND THE SCHOOL AD VALOREM TAX REDUCTION FUND; TO AMEND SECTION 27-69-31, MISSISSIPPI CODE OF 1972, TO PROVIDE FOR A DISCOUNT ON THE ADDITIONAL FACE VALUE OF STAMPS PURCHASED TO COMPLY WITH CERTAIN CIGARETTE EXCISE TAX INCREASES; TO CREATE A NEW SECTION 27-65-26, MISSISSIPPI CODE OF 1972, TO IMPOSE A SEPARATE SALES TAX LEVY ON RETAIL SALES OF CERTAIN FOOD FOR HUMAN CONSUMPTION AND TO REDUCE THE SALES TAX RATE ON SUCH FOOD; TO AMEND SECTION 27-65-17, MISSISSIPPI CODE OF 1972, IN CONFORMITY THERETO; TO IMPOSE A FEE ON NONSETTLING-MANUFACTURER CIGARETTES; TO REQUIRE MONTHLY REPORTING OF THE NUMBER AND DENOMINATION OF STAMPS AFFIXED TO PACKAGES OF NONSETTLING-MANUFACTURER CIGARETTES, THE NUMBER OF INDIVIDUAL PACKAGES OF NONSETTLING-MANUFACTURER CIGARETTES SOLD OR PURCHASED IN THIS STATE OR OTHERWISE DISTRIBUTED IN THIS STATE FOR SALE IN THE UNITED STATES AND ANY OTHER INFORMATION THE STATE TAX COMMISSION CONSIDERS NECESSARY OR APPROPRIATE TO DETERMINE THE AMOUNT OF THE FEE IMPOSED BY THIS ACT OR TO ENFORCE THIS ACT; TO REQUIRE REGISTRATION OF NONSETTLING MANUFACTURERS WITH THE ATTORNEY GENERAL; TO REQUIRE DEVELOPMENT, MAINTENANCE AND PUBLICATION BY THE ATTORNEY GENERAL OF A LIST OF NONSETTLING MANUFACTURERS THAT HAVE CERTIFIED THEIR COMPLIANCE WITH THIS ACT; TO PROVIDE FOR ENFORCEMENT OF THE REQUIREMENTS IMPOSED BY THIS ACT; TO GRANT PROTECTIONS FROM CIVIL LIABILITY TO NONSETTLING MANUFACTURERS THAT COMPLY WITH THE PROVISIONS OF THIS ACT; AND FOR RELATED PURPOSES" without my approval and assign the following reasons for my veto.

After full consideration, I am vetoing Senate Bill 3084, which proposes to reduce the sales tax on groceries and increase the tax on cigarettes. Senate Bill 3084 is the latest attempt by the Legislature to change the state revenue stream in the middle of tremendous financial uncertainty in the wake of Hurricane Katrina. Reliable, accurate information needs to be developed through proper research before such a tax shift is enacted, but this research has not been done.

In the first week of this session of the Legislature, the Senate passed Senate Bill 2310, with the promise of revenue neutrality for the state General Fund and for our cities and towns, and the House soon followed. Before I could act on this bill, the House Ways and Means Committee realized the claim was inaccurate and passed House Bill 1140 to increase the level of reimbursements to the municipalities, at the expense of the General Fund. However, even the higher reimbursements of House Bill 1140 were not enough to keep the municipalities whole.

I vetoed Senate Bill 2310 on January 18, 2006, because it would have resulted in a loss of some $1.5 billion revenue to the state over nine years and would have cut sales tax revenues to municipalities by more than $150 million over nine years. These revenue losses would have inevitably led to lower funding for education and basic services as well as to tax increases, ranging from municipal ad valorem taxes to sales tax increases on products other than groceries to higher income taxes.

After I vetoed Senate Bill 2310, the Senate passed the first version of Senate Bill 3084, again with the claim of revenue neutrality for both the state General Fund and for our cities and towns. The same day, the House passed a different proposal, House Bill 1634, also claiming revenue neutrality. To the credit of the House, House Bill 1534 was the first of the four pieces of legislation which actually held municipalities harmless from the effects of the risky tax swap. However, this was achieved by an increased diversion from the General Fund, and therefore, a larger reduction in state revenue.

The conference report of Senate Bill 3084 is now the fifth version of the tax swap the Legislature has considered, and its proponents again claim it is revenue neutral. This legislation would cut the sales tax on groceries from 7% to 3?%; increase the excise tax on a pack of cigarettes from 18 cents to 80 cents on July 1, 2006, and from 80 cents to $1 on July 1, 2007; and establish an additional fee of 43 cents/pack on cigarettes produced by manufacturers which did not participate in the tobacco settlement in the 1990's, in exchange for immunity from future lawsuits. The fee on the non-settling manufacturers would increase each year by at least 3%.

Senate Bill 3084 as sent to me is not revenue neutral. It will result in lost revenue to the General Fund, and the revenue reduction will increase in the out years. In this time of financial uncertainty, when we continue to seek additional federal assistance to help us recover and rebuild from Katrina, it is irresponsible to cut our own tax revenue, no matter how well intentioned.

In each version of these tax proposals, the supporters of the tax swap concept promise revenue neutrality, but they still do not take into account factors which will cause a net revenue reduction over time. The Legislature is relying on figures supplied by the State Tax Commission, but as its Chairman has pointed out repeatedly, the State Tax Commission has no expertise in estimating future revenue growth rates. Therefore, its estimates are in current dollars and do not take into account the fact that Senate Bill 3084 would replace a growing revenue source (sales tax on groceries) with a declining revenue source (cigarette tax).

For example, when the supporters of this bill claim it is revenue neutral, they claim the sales tax on groceries will generate the same amount of revenue five years from now as it generates today. The possibility of that happening is virtually zero. Sales tax collections have increased 5% each year over the last ten years.

When the supporters of this bill claim it is revenue neutral, they claim that a 10% increase in cigarette prices will cause a 4% reduction in taxable packs sold. However, they do not take into account the recent history of declining smoking rates in Mississippi and across the country. Last week the Washington Post reported that "Americans smoked fewer cigarettes last year than at any time since 1951, and the nation's per capita consumption of tobacco fell to levels not seen since the early 1930's." Nationally, smoking declined 4.2% in 2005 alone and declined 20% in the last six years.

Cigarette smoking and tax revenue have been declining in Mississippi in recent years, with no change in the tax. Cigarette smoking and tax revenue from cigarette sales will decline at a much faster rate if the tax is raised as proposed in SB 3084. Indeed, that is the chief goal of many of the bill's supporters, which is a worthy goal. Yet the legislative proponents greatly underestimate this reduction in tax revenue, which must explain why no fiscal note for the bill, setting out the revenue estimate, was provided beyond years one and two. Every year going forward the reduction in revenue * the loss to the state's programs * will be greater and greater. This is bad policy, especially now.

Last week, when I testified before the Senate Appropriations Committee about Mississippi's needs to recover and rebuild from Katrina, I was asked if our state has cut its taxes and its state revenue in the aftermath of the hurricane. I was told publicly this question had been asked of the Committee. Because of my veto of SB 2310, I truthfully answered that we had not cut our taxes or our revenue. After today's veto, that answer will still be accurate.

Beyond all the other reasons I've mentioned, this bill must be vetoed if we are to have any credibility when we seek the assistance of the federal government and the American people in our recovery and rebuilding. Any legislator ought to recognize that is true.

I remain opposed to raising anybody's taxes, but even those who disagree should see why this bill must be vetoed.

If the Legislature would like to have a study to determine the details of our revenue collections, I will go along. The fact is, the State Tax Commission has consistently said it does not even know the amount of sales tax collected on groceries today, so it (and no one else) cannot say if a different revenue stream would be sufficient to replace the sales tax on groceries.

Knowing the facts is critical before making a decision that involves hundreds of millions of dollars a year * money that citizens depend on for schools, colleges, law enforcement and other state services. Knowing the facts is even more crucial in a time of uncertainty, in which we Mississippians find ourselves.

We do not need to add to that uncertainty by enacting the latest version of a tax scheme just because it may be politically popular.

For these reasons, I urge the members to sustain the veto and reject Senate Bill 3084.

Respectfully Submitted,

Haley Barbour

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Previous Comments

ID

138038

Comment

On his blog, Sid Salter is going after Barbour's "logic", as he calls it, although when you read his post you see that it is more than "logic" that is at issue; it is honesty, intellectual and otherwise: Back in early 2003, when I interviewed him for a story shortly before he formally announced his candidacy for governor, I asked Barbour about Mississippi's 7 percent sales tax on food and about higher cigarette taxes. He was flatly opposed to cutting the sales tax on groceries then and he's still against it. He likewise opposed hiking cigarette taxes then and still opposes it. So the notion that Barbour would have entertained cutting grocery taxes and raising cigarette taxes under any circumstances in any bill based on any numbers save his own phantom numbers is just so much hot air. Barbour's fond of saying: "Be for what you're for." In that vein, Barbour's true to his own advice. He's for taxing Mississippi's poor and working poor at the highest rate possible as a means to keep any new taxes away from the wealthy. He's for protecting his former lobbying clients in the tobacco companies from higher taxes that might impede the sale of their products – despite the fact that Mississippi taxpayers are subsidizing their sales through ever-increasing public health care expenditures. [...] Numbers you won't see Barbour's magic number crunchers distributing will include how much public health dollars could be saved with a significant smoking reduction caused by higher prices or how much of the grocery sales tax savings would be plowed back into other sales by families with a little extra expendable income. You also won't see Gov. Barbour talking about regressive taxes as opposed to progressive taxes because he's for what he's for — and since the first day he decided to run for governor, Haley Barbour has been for nothing if not for regressive taxes. The governor apparently thinks the best way to help displaced, impoverished Katrina survivors is to charge them the highest sales tax on food in the nation. But I guess as long as the victims can get cheap cigarettes, they'll be OK, right? Whoa, I wish Mr. Salter would have been half as hard on Mr. Barbour during the campaign. There were some twists in logic back then, too -- but, hey, better late than never. (Can I tell you how much I hate the Blogger software they use for media blogs? Anyway. They're late to the game, but they're in it, I guess. Sort of.)

Author

DonnaLadd

Date

2006-03-15T22:13:18-06:00

ID

138039

Comment

(BTW, I find it hard to believe that neither Hampton or Salter are blogging about Mr. Melton threatening one of their reporters. ?)

Author

DonnaLadd

Date

2006-03-15T22:14:31-06:00

ID

138040

Comment

so what happens when everyone stops smoking? Does grocery taxes go back up? I'm tired of all these tax exemptions/special taxes; personally. Why didn't people try to just raise the cigarette tax alone and force the money into a medical fund for the cigarette related illnesses? it seems like a form of insurance:) oh kind of what they did when they got the lawsuit money they didn't earmark...shady. the whole concept of a revenue neutral tax increase/decrease with these issues is just inflammatory and wanted to get everyone stirred up. I applaude the governor for vetoing the thing...I might differ my opinion if he had shot down the cigarette tax alone but that's not something i have to argue today:)

Author

guywithanidea

Date

2006-03-15T22:50:08-06:00

ID

138041

Comment

I would like to pose questions about parts of the governor's speech. The first is a question of fact. To quote Barbour: "The fact is, the State Tax Commission has consistently said it does not even know the amount of sales tax collected on groceries today, so it (and no one else) cannot say if a different revenue stream would be sufficient to replace the sales tax on groceries." Is this true? I mean, the grammar isn't true, I'll grant you that. The side comment, in parentheses, should read "along with everyone else" or something along those lines rather than (if we are going to be strict about it) what it actually says, which is that everyone BUT the Tax Commission CAN say that the revenue stream from cigarette taxes would be sufficient. That aside, was what he was TRYING to say true? Has the Tax Commission actually admitted that it has no idea what grocery tax revenues are? It has said so "consistently"? All the projections are crapshoots? None of our fanciest tax nerds have anything more than crazy guesses? Then there is also this: "Beyond all the other reasons I've mentioned, this bill must be vetoed if we are to have any credibility when we seek the assistance of the federal government and the American people in our recovery and rebuilding." I understand that the man was making a speech, but does anyone dispute that it is wild hyperbole to assert that ALL of our credibility with the federal government and American people rest on this veto? Will any of them even notice?

Author

Brian C Johnson

Date

2006-03-16T03:18:43-06:00

ID

138042

Comment

so what happens when everyone stops smoking? Does grocery taxes go back up? For one, health-care costs would decrease. While waiting to go on WLBT this morning -- at 6-friggin'-a.m., they had a report on Barbour's veto. They quoted him saying that the tax plan would hurt municipalities -- however, they did not provide the opposing view from the state Tax Commission. I pointed out to the producer that even Sid Salter isn't buying Barbour's factual statements on this one. Otherwise, though, I enjoyed my visit there. Turns out that WLBT is also frustrated about information access with the city, and Wilson Stribling and I had a good talk about Sunshine Week and the problems we're having getting info from the city and why it's important. We were live, but I'll try to get the snippet to post.

Author

DonnaLadd

Date

2006-03-16T09:22:28-06:00

ID

138043

Comment

yeah health care cost will go down...one day... maybe in about 20-50 years once the symptoms start taking people out, but I don't know anyone who currently smokes (relatively young people) who are having current adverse health affects yet. That's why i'm such a big fan on the pseudo "tax/insurance" on the sticks. If they actually earmark the money it's like a forced insurance premium. I'm really ok that a bulk of the smokers health care be paid for by the smokers. So please tell me more about how the reduction of local taxes and the increase of state taxes is going to not hurt municapalites?I'm of the mindset that the politicians aren't going to just give the money back out equatibly (who's brave enuf to claim they will? if so please use the tobacco settlment money or casino money as good examples of doing what they said they would) I'd rather keep the money locally away from the legislatures. Logically it makes sense to me thus, that we will be paying higher property taxes or some other local tax to make up the difference. We can plan funny numbers all day but the people of Mississippi will be giving more money to the government soon enuf. I still support Barbour on vetoing this piece of junk legislation.

Author

guywithanidea

Date

2006-03-16T11:07:55-06:00