Pa. unlikely to tax cigars and smokeless tobacco

HARRISBURG (AP) — Pennsylvania is poised to maintain a long-standing tax exemption on the sales of cigars and smokeless tobacco, despite two attempts by Gov. Ed Rendell over the past three years to remove it.

Even though all other states tax the items, such a tax is not expected to appear in a nearly week-old budget agreement that is still being hammered into shape in the Capitol.

Earlier this year, Rendell proposed the tax to help wipe out the state’s multibillion-dollar revenue shortfall. His attempt in 2007 would have helped underwrite an extension of state-subsidized health insurance to adults who lack coverage.

Resistance by Pennsylvania’s legislators can be attributed to their desire to protect tobacco growers in southeastern Pennsylvania, cigar makers that employ hundreds and heavy use of snuff and chewing tobacco by miners and steelworkers in southwestern Pennsylvania.

In addition, Pennsylvania is home to four of the nation’s eight leading cigar retailers. One, Cigars International of Bethlehem, would have to consider moving to Florida if Pennsylvania approved a tax on cigars, company president Keith Meier told the Senate Finance Committee at a February hearing on Rendell’s proposal.

Legislative leaders did, however, agree to extend a new tax on games of chance played by clubs and nonprofits with liquor licenses and tickets for cultural institutions and performing-arts events.

They also agreed to raise the tax on cigarettes by a quarter to $1.60 per pack while introducing that tax onto the growing sales of little cigars called cigarillos, which are not made in Pennsylvania and compete with cigars.

Public health groups argued that extending the tax to cigars and smokeless tobacco would be good public policy and a substantial source of revenue if the tax were to be commensurate with the one imposed on cigarettes.

But Senate Appropriations Committee Chairman Jake Corman, R-Centre, said many of his colleagues did not think the $50 million that could be raised under Rendell’s proposal was worth it.