Budget committee passes tax package, It includes $100 million from sale of tobacco payments
The state would immediately use an extra $100 million from the sale of its future tobacco settlement payments to balance the budget under a plan approved Thursday by the Legislature's budget committee.
The Joint Finance Committee approved a tax package on an 11-5 vote that included selling the tobacco settlement payments and increasing the cigarette sales tax by 9 cents a pack to 68 cents.
No income or corporate tax increases were included in the proposal that helped produce a balanced budget, despite a $761 million shortfall discovered over the past several months.
"I'm proud to say that we aren't raising general taxes," said committee co-chairman Rep. John Gard, R-Peshtigo. "The cigarette tax increase is larger than some would have liked and a lot smaller than some would have wanted."
David Gundersen, executive director of the Wisconsin Tobacco Control Board, said the board supports any price increases -- whether it's by companies, taxes or retailer markups -- because they help reduce smoking among youth.
But Gundersen said 9 cents is not a significant price increase.
"The only thing that's going to decrease consumption is a significant price increase," he said.
The full Legislature and Gov. Scott McCallum must approve the proposal for it to become law.
The increase in the cigarette tax would raise an estimated $63.6 million over the next two years. A separate tax increase on cigars, pipe tobacco and other non-cigarette tobacco products from 20 percent of the price to 30 percent would raise an estimated $11.1 million between 2001 and 2003.
In his 2001-03 state budget, McCallum proposed selling the state's 25-year tobacco settlement payments, estimated at $5.9 billion, to investors for a one-time lump sum of $1.3 billion.
The 1998 agreement between the tobacco industry and 46 states, including Wisconsin, requires cigarette makers to pay a total of $306 billion to compensate for public health care expenses due to smoking.
McCallum proposed using $350 million from the sale of the tobacco payments for the 2001-03 budget.
Members of the Joint Finance Committee, chipping away at the budget shortfall, voted to increase the tobacco money immediately available for spending to $450 million. The rest of the settlement money would go into a separate endowment fund declared off limits to legislators.
Interest earned on the invested settlement money would go back into the state treasury and be spent just like funds raised through income and sales taxes.
The governor originally said the plan could yield the state $6.8 billion over the next 30 years, although budget analysts said that figure would be slightly lower because of the decision to put $100 million less in the endowment fund.
Attorney General James Doyle, who has been critical of selling tobacco payments since McCallum introduced his budget, said the plan was shortsighted. Doyle said the money was intended to improve the health of state residents.
"To sell that away in this way and use most of it to pay back their back debts, it's bad fiscal management and it's selfish," Doyle said.
The Joint Finance Committee also voted to base corporate taxes only on companies' sales in Wisconsin but not on their staff and property in the state, as the current system requires.
However, the committee voted to delay the phase-in of the single-sales tax factor until 2004, which would save the state an additional $8 million in the 2001-03 budget.
Wisconsin Manufacturers and Commerce president James Buchen said the measure would help entice new companies to bring jobs into Wisconsin rather than other states.
The budget committee also voted to set aside $44 million for prescription drug legislation and to create nine technology zones -- as opposed to the governor's proposed 20 -- where high-tech companies could get tax credits of up to $3 million.