Mississippi governor vetoes cigarette/grocery tax swap

Mississippi Gov. Haley Barbour, a former tobacco lobbyist, vetoed a bill passed by the state legislature that would raise the tax on a pack of cigarettes to $1 and reduce the sales tax on groceries by half from its current rate of 7%. The change would have been phased in over a period of two years. He also vetoed a previous version of the bill that would have raised the cigarette tax by $1 and eliminated the sales tax on groceries altogether by 2014.

A similar bill was introduced in the Tennessee General Assembly that would raise the cigarette tax to 35 cents per pack and cut the state sales tax on groceries from 6% to 3%. It would also increase the cigarette tax each year through 2016 to offset any decrease in sales tax revenues from groceries. The bill appears to have wide bi-partisan support. Tennessee's current tax on cigarettes is 20 cents per pack, one of the lowest in the nation. (Mississippi's is even lower at 18 cents per pack.)

Tennessee's Gov. Phil Bredesen and his Finance Commissioner say they are opposed to the change because of uncertain revenues from the tax and declining sales of cigarettes. Gov. Bredesen vetoed a bill last year that would have raised the cigarette tax to 50 cents per pack, but only on selected smaller brands. The tax revenues, estimated at $12 million, would have been earmarked to help Tennessee's troubled TennCare program.

Tobacco special interest groups and lobbyists are of course watching closely. They spent more than $23 million in federal elections alone over the past five years. The top three highest paid lobbyists in Mississippi all list tobacco companies among their biggest clients.