Capitol pushes 40 percent tax hike for cigarettes
By Kevin Dayton
Advertiser Capitol Bureau Chief
Smokers would see cigarette taxes jump from $1 to $1.40 a pack over the next two years, under a bill that gained preliminary approval last night from Senate and House negotiators.
House Bill 2741 would hike the state cigarette tax in three steps, eventually pulling in an additional $16 million a year in tax revenue by 2004.
The agreement came as lawmakers worked late into the night to meet a midnight Friday deadline to position bills for final votes next week. The Legislature is scheduled to adjourn a week from today.
Lawmakers also reached tentative agreement last night to transfer a total of $140 million from various special and revolving funds into the state's general treasury.
Special funds are accounts where money has been parked for various purposes, but lawmakers have repeatedly dipped into those funds when tax collections lag as a way of avoiding budget cuts or public worker layoffs.
One provision of the bill, House Bill 2827, would remove $22 million from the state highway fund, which is financed through gasoline and weight tax collections and used to build and maintain state highways.
Lawmakers have dipped into that fund repeatedly in the 1990s, removing more than $100 million to balance the budget. That has caused some concern the state is delaying or skimping on highway maintenance, but lawmakers said the $22 million will be replenished when the state receives a similar amount from a settlement of its antitrust lawsuit with the oil companies.
State Transportation Director Brian Minaai said Gov. Ben Cayetano had intended that the settlement money would be used to increase the cash flow in the highway fund.
Since it isn't clear when the settlement money will be deposited, the loss of the $22 million already in the highway fund could jeopardize federally funded projects where the state is required to kick in some matching money. Another possibility is the state would once again cut back again on its repair and maintenance program, he said.
Hawai'i's tobacco tax is already one of the highest in the nation. New York has the nation's highest cigarette tax at $1.50 per pack.
The agreement struck last night would boost Hawai'i's cigarette tax to $1.20 a pack in October, $1.30 in July 2003 and $1.40 in July 2004.
Last night's conference committee agreement was a compromise between the Senate, which had proposed doubling the tax to $2 per pack, and the House, which proposed a more modest increase to $1.20.
Meanwhile, a bill to increase another "sin tax," the state tax on liquor, appears dead for the year.
