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Taxes on Cigarettes Could Go Up

With state budget, county gets OK to increase local cigarette tax to 20 cents.

In a month, Kim Smith may smoke 40 packs. “I can do some real damage to a carton cigarettes,” said Smith. “When I’m at home, doing nothing, boy, do I light up!”

In years past, Smith paid $2 in county taxes on those 40 packs, a tax of five cents a pack that cost Smith $24 a year. The tax generated about $650,000 in revenues for the county each year.

But with new cigarette taxes given final approval in Richmond this month, County Board members could increase that the local cigarette tax to 20 cents a pack. That increase could cost Smith $8 a month, or close to $100 a year, and could raise $2.6 million a year for county coffers, money that board members vow to give back to local tax payers.

“We want to tell people right up front,” said Board Chair Barbara Favola. “At the same time we advertise the … cigarette tax increase, we are going to establish a real estate rate reduction fund.” Money from cigarette taxes would be held in check until next spring, and could fund up to a cent drop in the real estate tax rate.

As a smoker, Smith was happy to hear it. “Anything that can provide [tax] relief is a good thing,” she said. She also saw a possible benefit to increasing the price of cigarettes. “If [extra costs] would stop one young person — just one — it would be worth everything.”

<b>OPPORTUNITY TO INCREASE</b> local cigarette tax was a key issue in County Board requests of Arlington Assembly members in January. For the third year in a row, Board members asked Arlington’s delegates and state senators to push for passage of a bill that would give Virginia counties the power, already granted to Virginia cities, to increase cigarette, gas and food taxes without first seeking state approval.

That measure failed. But some county wishes were granted during the Assembly’s protracted struggle over the state budget, if only coincidentally. One key element of Gov. Mark Warner’s (D) tax reform package was an increase in the state’s sales tax on cigarettes, at 2.5 cents per pack the lowest in the nation.

Efforts to achieve tax reform meant that equal taxing authority for counties fell by the wayside. But Warner’s effort to increase the state cigarette tax to 20 cents this year, and 30 cents next year, met with approval.

In essence, that gave Arlington and Fairfax county officials the chance to increase the county’s cigarette tax as well. “The way the law was written, it said the county tax would be five cents or the equivalent of the state tax, whichever was higher,” said state Sen. Mary Margaret Whipple (D-31). “Nothing changed about the law, but the state tax is going to be higher than five cents.”

<b>HIGHER TAXES</b> on Arlington cigarettes are a good end result, said Favola, because they will allow the county to rely on fewer funds from property taxes. That’s good news whether it’s intentional, or the byproduct of a lengthy legislative standoff, she said.

“We told lawmakers if you give us additional revenue streams, we will relieve pressure on real estate,” she said. That money will likely mean a decrease in the property tax rate next year. In February, when County Manager Ron Carlee presented his budget proposal to the Board, he told Board members that a one-cent cut in the tax rate would cost about $3.6 million in revenues.

That money would be available in full from cigarette taxes in 2006, when the county could begin collecting 30 cents on every pack sold in Arlington. There’s no guaranteed rate cut, Favola cautioned. “If assessments took a nose dive, and we weren’t getting as much money as we needed, we would use this money rather than raise the property tax rate.”

<b>PROPERTY TAX CUTS</b> are good news, said Tim Wise, president of the anti-tax Arlington County Taxpayers’ Association. But it won’t put an end to calls for slashed tax rates in the county.

“If they can find ways of spreading the tax burden … that’s one thing,” he said. “As long as, at the same time, they reduce the size of government.”

Other fiscal conservatives in the county were encouraged by news of the cigarette tax plans.

“If they do what they say they’re going to do, I’ll get up at the Board meeting and cheer,” said Wayne Kubicki, a member of the county’s fiscal affairs advisory commission.

Smith was wary about county spending overall, but she had high hopes for the cigarette tax. “It is something that will influence younger people, who don’t have as much discretionary income,” she said. “It’s a debilitating problem. Maybe we’ll save some lives.”