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Follow VPR's statehouse coverage, featuring Pete Hirschfeld and Bob Kinzel in our Statehouse Bureau in Montpelier.

Cigarette Tax Eyed To Fund Health Care Costs

Smokers in Vermont could soon be paying more for a pack of cigarettes, as House leaders eye a 50 cent per pack tax increase to help pay for several health care programs.

The cigarette tax increase is on the table as an alternative to a tax plan proposed by Gov. Peter Shumlin in January.

At the beginning of the session,  Shumlin proposed doubling a tax on all health care claims as a way to help pay for the ongoing operations of the state’s new health care exchange and several other health related programs. This tax was expected to raise around $14 million.

House leaders disliked the plan right from the start because they’re convinced that the tax will be immediately passed along to consumers by the insurance companies. So for the past few weeks, they’ve been trying to balance the state budget for next year without using any new tax revenue.

But making cuts to fill the $14 million gap has proven to be very difficult, so the House Ways and Means committee is now considering a plan to raise roughly $5 million in new revenue.

One of the leading candidates for the tax hike is the tobacco tax. Currently the state tax on cigarettes is two dollars and 62 cents a pack. House Speaker Shap Smith would like to increase it by 50 cents.

"Because people who smoke are costing the system money in the long run because they tend to have worse health care issues." - House Speaker Shap Smith, supporting a cigarette tax increase to pay for several health related programs.

“The point of actually using the cigarette tax for basically supporting health care costs which is what we would be using it for actually seems to make sense to me,” said Smith. “Because people who smoke are costing the system money in the long run because they tend to have worse health care issues.”

Smith says increasing the tobacco tax makes much more sense than imposing a tax on health care claims.

“So I like the idea of raising the cigarette tax and using it for health care costs rather than raising a tax on the cost of health care services to roll it back into health care costs,” said Smith.

Lawmakers last raised the tobacco tax in 2011 by 38 cents a pack, and, at the time, Gov. Shumlin was critical of the plan. He said smokers would flock to New Hampshire to purchase cigarettes at a lower price and that Vermont would lose tax revenue. Smith is not concerned about this possible outcome and he hopes the tax increase will encourage some people to stop smoking.

“So my view is that if we impose a tax that has less cigarettes being sold that’s actually a good thing,” he said. “I don’t think that we should be worried about less cigarettes being sold we want people to smoke less cigarettes.”

The Vermont Lung Association would like to see the tobacco tax raised well beyond the House proposal. The Association says raising the tax by $1.25 a pack is the single most effective way to reduce youth smoking. However, it’s unlikely that lawmakers will support this plan.