Daniels: Boost tax on cigarettes 25 cents
For the second time in two years, Gov. Mitch Daniels used his State of the State speech to call for a tax increase -- this time proposing a jump of at least a 25 cents for a pack of cigarettes.The goal, Daniels said, is a healthier Indiana where fewer young people smoke cigarettes and companies are not intimidated from doing business in a state with high health costs.
"All the evidence shows that the most effective way to deter young smokers is at the cash register," Daniels said in the speech. "I ask this assembly to raise Indiana's lowest-in-the-Midwest cigarette tax by at least 25 cents a pack."
Daniels' packed several proposals into the 33-minute speech, urging lawmakers to privatize Indiana's transportation infrastructure; give local government the freedom to consolidate functions and raise revenue beyond property taxes; deregulate telecommunications; and find ways to cut school overhead to free money for education programs.
But while Daniels had spoken of all those other initiatives before, the cigarette tax came as a surprise.
In 2005, Daniels surprised many when he asked for a one-time surtax on higher-earning Hoosiers to help balance the state's budget.
Lawmakers rejected that immediately. This year, they have shown no interest in raising taxes. All 100 members of the House, where Republicans cling to a 52-48 majority, are up for election, along with half of the 50-member Senate, where the GOP dominates 32 to 18.
Wednesday night, they were cool to this new tax increase.
Rep. Charlie Brown, the Gary Democrat who has been one of the biggest proponents of a cigarette tax increase, was the only lawmaker who gave Daniels a standing ovation for the proposal.
He doesn't see any way the increase will pass.
"Too many tobacco boys here," he said of his fellow lawmakers.
Both Republicans and Democrats want to know how the money will be used. Administration officials estimated the increase, which would bring Indiana's cigarette tax to at least 801/2 cents per pack, would generate from $115 million to $150 million in revenue. The tax was last raised in 2002, jumping 40 cents to the current 55-and-a-half cents per pack.
Daniels did not earmark the money. The answer, lawmakers said, will be key to the plan's success, or failure.
"If it's just going to be used to increase spending, then no," said Sen. Robert Meeks, R-LaGrange, who is chairman of the Senate Appropriations Committee.
But, he added, if the money is used to reduce property taxes -- a top goal for lawmakers in both parties -- he is willing to listen.
Taking a page from his former boss, President Ronald Reagan, who began a presidential tradition of honoring citizens in his State of the Union speeches, Daniels singled out three Hoosiers for praise.
He honored Jennifer Nelson, a Terre Haute woman who signed up more than 200 people for prescription discounts; Teresa Marshall, Shelbyville, a Department of Natural Resources employee who turned down a bribe and turned in the offender; and track star Sunder Nix, a 1984 Olympic Gold medalist from Indiana.
Daniels was interrupted by applause 25 times, but almost all of that came from his fellow Republicans. Still, even they were mostly silent when Daniels proposed the tax increase. Most of the applause then came from members of his administration, sitting in the House gallery.
One burst of applause made the governor smile, and pause, at the seeming inappropriateness of the ovation.
"We weigh, drink and smoke too much and exercise too little," he said as lawmakers began clapping.
Daniels has been on a campaign to improve Hoosiers' health and on Jan. 1 barred smoking in the state government complex in Indianapolis. Only 17 states have a lower cigarette tax than Indiana. Of surrounding states, Michigan's tax is $2 per pack, Ohio is $1.25, Illinois is 98 cents, and Kentucky, where tobacco is a major crop, charges 30 cents per pack.
While Daniels may have started a legislative debate with his call for a cigarette tax increase, he may have abruptly ended another debate.
Since Indiana reaped about $250 million last fall in a tax amnesty program, lawmakers have been making their wish lists as they contemplated ways to spend the cash.
Wednesday night, Daniels said he is using $156 million of that money to pay back Indiana's public schools half of what they have been owed since 2001. The payments were delayed then to help the state balance its budget.
But he also called for schools to use their money more efficiently, by pooling resources and purchasing power to free up money for the classrooms. Hundreds of millions of dollars, he said, are going to administrative costs that could instead fund more teachers, full-day kindergarten or a longer school year.
He used the same approach with local government, which he said needs "an extreme makeover."
He called on the legislature -- which has resisted approving most of the city-county merger proposal backed by Indianapolis Mayor Bart Peterson -- to give local government the "blanket pre-approval" to consolidate.
"The days of top-down control of local affairs from (the Statehouse) have run their course," Daniels said. "Let our traditional 'creature of the state' system begin giving way to a new era of home rule and local autonomy across our state."
But he also said local government must reform by taking property tax assessment out of the hands of 1,008 township officials and moving it to the county level. That would mean 178 elected township assessors would lose their posts and another 830 township trustees would lose their assessment duties.
That proposal is sure to face political opposition, as is his "Major Moves" transportation plan, which includes leasing the Indiana Toll Road.
That plan, he said, will "trigger tremendous job growth using in large part a very handy tool: Other people's money."
Daniels argued that the increased tolls on the road would be mostly paid for by out-of-state motorists, while the money from leasing the 157-mile highway across northern Indiana will pay f or long-planned projects, including the I-69 extension in southern Indiana.
"We would be foolish not to seize that opportunity, and make the dreams of decades a reality in our time," he sad.
Daniels told Hoosiers that he knows the changes may be difficult for all to accept.
"To those of our fellow citizens for whom all this seems like too much change too fast, we say, 'We understand,' " Daniels said.
But, he added, Indiana's young people "are the million reasons that we cannot stand still in this state."
Now, Daniels concluded: "Let's move. Let's act."
