Bredesen vetoes cigarette tax hike, angering lawmakers

Lawmakers passed the tax hike at the end of this year’s session, saying it was only fair to tag cigarette companies that don’t pay into the multistate settlement with a 50 cents per-pack tax hike.

Legislative leaders said they were disappointed with the veto.

Since just the smallest companies haven’t signed onto the settlement, the tax hike was only expected to raise roughly $12 million to $15 million.

Lawmakers expected the tax would have increased the price of the bargain or generic cigarette brands, and hoped it might discourage some young smokers from picking up the habit.

“We know that increasing the price of cigarettes is the best way to do that,” said Democratic state Sen. Rosalind Kurita, a Clarksville resident running for the U.S. Senate.

Lawmakers said it might not make sense to stay in the master settlement agreement if they can’t raise the price of the cheapest cigarettes.

“Just because we can’t get the all of the attorneys to agree on how the legislation might effect the state doesn’t mean we give up on trying to keep children from buying cheap cigarettes,” said House Majority Leader Kim McMillan, D-Clarksville.

But the governor said state Attorney General Paul Summers determined the hike could jeopardize millions of dollars the state gets from the large tobacco companies under the master settlement agreement, the result of years of litigation on the part of many states.

Since 1998, Tennessee has received more than $1 billion from the settlement with tobacco companies. The state is scheduled to get about $153 million this year, Bredesen said.

The governor’s office said the veto was Bredesen’s first.

Bredesen said he was confident he could balance the budget without the money raised by the small tax hike. He said he would look for cuts elsewhere in the budget that takes effect July 1.

“We’re talking about a relatively modest amount of money that will be fully absorbed with small reductions in other areas of the budget,” Bredesen said in a statement. “This veto wont undermine our efforts to strengthen the health care safety net.”

Summers believes targeted taxation of nonparticipating companies without raising taxes on the larger companies could be interpreted as a violation of the master settlement agreement.

Summers, in a letter to the governor, said Tennessee’s tobacco payments “might be delayed several years while we argue this point in court.”

“This is a complex issue that raises a number of complex legal questions,” Bredesen said. “This veto falls on the side of caution.”

Calls to Senate Majority Leader Ron Ramsey and House Minority Leader Tre Hargett seeking comment were not immediately returned.