Cities Eye Cigarette Tax Increase
Northern Virginia city officials are considering raising local cigarette taxes even as lawmakers in Richmond contemplate limiting their ability to do so with at least two of more than a dozen bills aimed at tobacco taxes and introduced in the General Asse
In December, Alexandria increased its cigarette tax to 50 cents a pack from 30 cents to match Chesapeake's tax, the highest in the state.
Earlier this month, Virginia Beach also posted a 50-cent-a-pack tax. Now Manassas, Manassas Park, Fairfax City and Falls Church are considering increases.
There is no limit under current law on local tax that Virginia cities and towns can impose on cigarette sales. But as the state grapples with a $1.2 billion budget shortfall, state legislators are weighing several bills that would raise the state tax -- at 2.5 cents a pack, the nation's lowest -- and limit what cities, towns and counties can do.
Del. Vivian E. Watts (D-Fairfax), who sponsored one such bill, said a state increase is unlikely without a local cap.
But that would limit the ability of financially strapped local governments to raise revenue.
Fairfax and Arlington are the only counties in the state that can tax cigarette sales. But their taxes are limited to 5 cents, and any change must be approved by the General Assembly.
Officials of Virginia cities say they want to raise rates to diversify their revenue sources and increase revenue at a tough economic time, and they object to any limits.
Watts's bill would raise the state tax to 25 cents a pack but limit counties, cities and towns to 50 cents a pack.
"With the degree of opposition that the [tobacco] industry would have to counties opening up this revenue source, it would take on a lot of baggage if there wasn't a cap on cities," Watts said.
Del. Phillip A. Hamilton (R-Newport News) sponsored another bill that would raise the state tax to 50 cents a pack and limit localities to a further 25-cent-a-pack increase.
Falls Church City Manager Daniel E. McKeever said that when Alexandria raised its cigarette surcharge, other area government officials began thinking.
"They saw someone talking about it and they saw articles in the newspaper, and the talk sort of spread over the region," he said.
David Hodgkins, finance director for Fairfax City, said Alexandria's increase gives "ammo" to his office to do the same. "We try to stay in line with other areas," he said. "If other people are looking at it, we are more likely to."
Early this month, an e-mail warning of a possible cap on local cigarette taxes circulated among Virginia's city commissioners of revenue.
Within days, Manassas Commissioner of Revenue John P. Grzejka suggested that the City Council consider a 10-cent cigarette tax increase in the upcoming budget, to 25 cents a pack. Grzejka said the increase could create an additional $210,000 in revenue.
Councils in Manassas, Manassas Park, Falls Church and Fairfax City won't vote on any such tax increase until the spring, and the Hamilton and Watts bills would negate any changes made by cities after Jan 1.
The idea of a cap has broad opposition among Virginia cities.
"The Virginia Municipal League is very concerned that the tobacco industry may attempt to restrict local tax authority in conjunction with proposals on the [cigarette] sales tax," said Michael L. Edwards, the league's deputy director.
Glenn Schneider, a board member of the Smoke Free Maryland Coalition, said limiting local cigarette tax rates would help the tobacco industry focus its lobbying efforts more narrowly.
"It's a lot easier to put 10 to 15 lobbyists in the General Assembly than it is to send them to local governments across the state," Schneider said.
Tony Troy, a tobacco lobbyist for the Atlanta-based law firm Troutman Sanders, criticized local cigarette taxes.
"One needs to consider what that does to local merchants, who are creating revenue and jobs," he said. "They could actually lose money."
In any case, said Bob de Voursney, a professor at the University of Virginia's Weldon Cooper Center for Public Service, the climate is bad for limiting localities' abilities to raise revenue.
"Local governments are getting whacked this year," he said. "For the state to do something that reduces local revenues would be very hard."