March 18, 2013 — Portland City Commissioner Steve Novick told the House Revenue Committee Friday that the state of Oregon trusts local governments to do a lot of things — arrest people, put them in jail, set zoning ordinances, raise property taxes, even generate income taxes.
“Some previous Legislature -- far less wise and thoughtful than this one -- decided that for some reason we shouldn’t have the power to tax cigarettes,” Novick said.
New York City ($1.50 per pack) and Chicago ($3.68 per pack) have been able to raise local tobacco taxes higher than their states. But in Oregon, which also has a lower state tax burden, cigarettes have a special exemption in state law specifically precluding them from being taxed on the local level.
While the average price of smokes in Chicago is more than $11, in Portland a pack is still a little more than $5.
House Bill 2870 would change that, allowing Oregon’s 36 counties to enact their own taxes with approval from local government. The bill requires at least 20 percent of the revenues to be spent on public health and would apply to Multnomah County, but not the city of Portland.
Nevertheless, Novick said he’s supportive because Multnomah County could raise more revenue by increasing the tax on cigarettes, invest those resources in mental health and help the Portland Police Bureau with the underserved homeless community.
According to Multnomah County Commissioner Jeff Cogan, there are 4,000 homeless people in the county, half of whom have substance abuse problems and a third of whom are mentally ill.
“[The tax power] provides local communities a local way to respond. I urge you to give the counties of Oregon the ability to help themselves,” Cogan said. “Folks who are smoking are causing a tremendous cost on public health.”
House Revenue Chairman Rep. Phil Barnhart, D-Eugene, indicated he might consider increasing the percentage dedicated to public health, which was set arbitrarily. Cogan responded by saying he expected the overwhelming majority of the revenue in Multnomah County to be spent on public health.
The legislation could be even more appealing to the rural counties of western Oregon, where public health departments have been decimated since a federal subsidy ended that had replaced revenues counties once received from clearing old-growth timber on federal lands.
“We are often closest to our constituents. Our voters keep us accountable for the decisions we make,” said Columbia County Commissioner Earl Fisher, who said the county has been forced to scale back public health programs, furlough county employees and consider closing the county jail.
Tobacco companies, convenience stores and cigarette distributors led the opposition to the bill, much as they had three days earlier at a hearing for House Bill 2275, which would increase the cigarette taxes in Oregon by a buck a pack to $2.18.
House Bill 2870 might have a better chance of passage than House Bill 2275, which requires the three-fifths majority necessary of all state tax increases and would need at least two Republicans in each chamber if all Democrats supported the measure. HB 2870 would not raise such taxes immediately or require local jurisdictions to take such action, it only gives them the option.
Brian Barry, the director of Core-Mark International, a supplier of convenience stores and distributor of cigarettes, said having so many taxing districts wouldn’t allow him to use a machine that stamps cigarette packs.
“If I’m forced to stamp 36 jurisdictions, the machine becomes obsolete, and I will have to hand-stamp those packs of cigarettes, driving up costs exponentially,” said Barry, who also distributes cigarettes to Idaho, Washington and Alaska but said none of those states allows local governments to enact their own cigarette taxes.
But Barry’s claim was false — Anchorage, Alaska, adds a $2.206 local cigarette tax on top of the state’s $2 tax. Six other jurisdictions in Alaska have local cigarette taxes, too, according to the national advocacy group Campaign for Tobacco-Free Kids.
Oregon does have adult smoking rates below the national average of 19 percent, but its tax ranks in the bottom half of states, behind more conservative states like Texas, South Dakota and Arizona. Most other states also have a sales tax that increases the retail price of cigarettes. In Oregon, a pack of smokes costs $5.25 on average.
“The tobacco user is just like anybody else, he just pays more taxes,” said Chris Girard, the chief executive officer of Plaid Pantry, who said that 50 percent of his customers are smokers. “We’re driving purchasers into the black market where it goes untaxed.”
State cigarette taxes have not been raised since the 1990s. They actually went down 10 cents from their peak of $1.28 in 2004. The median national state cigarette tax is $1.36, while the tobacco companies have increased their prices by $2 since 1998, almost doubling their revenue per pack, according to Tobacco-Free Kids.
The rollout of HB 2275 focused less on raising revenues for public health but was more of an attempt to stop people from getting addicted to tobacco.
Dr. Eric Stecker, a cardiologist at Oregon Health & Science University who has a master’s degree in public health, said for every 10 percent increase in the price of cigarettes, there’s a 7 percent decrease in teen smoking.
“Most of your voters’ kids, it’s hard for them to find $5,” Stecker said. “Keeping kids from smoking is a bipartisan issue.”
But at both hearings, Republican critics such as Rep. Jason Conger of Bend and Rep. Cliff Bentz from Ontario questioned how fair it was to increase an already regressive tax on “a captive audience” — a group of addicts who are disproportionately poor.
Rep. Mitch Greenlick, D-Portland, said he would, in theory, raise the tax $5 or $10 to snuff out the habit, and called tobacco more addictive than heroin.
Dr. Bud Pierce, an oncologist and the president of the Oregon Medical Association, waved away the notion that the Republicans were acting as defenders of the working class by resisting tobacco tax increases.
Pierce said his blue-collar father survived World War II and a Japanese prisoner-of-war camp but could not overcome his addiction to cigarettes and keeled over of a sudden heart attack related to his three-pack-a-day habit.
“It’s not looking out for the poor by saying we’re not going to tax them so they don’t have to pay more to smoke. I completely disagree with that,” he told legislators. “When people are being abused by a more powerful interest it’s time for leadership to step in and block that, and you’re the leadership.”
