LANSING (AP) — A proposal to raise the state’s
cigarette tax by 75 cents a pack faces opposition from a Michigan
business coalition.

The proposed tax increase is a key piece of Gov. Jennifer
Granholm’s plan to balance the state budget for the fiscal
year that starts Oct. 1.

The tax increase could raise up to $295 million, wiping out
roughly a quarter of the state’s projected deficit.

The business coalition said state leaders should do more to cut
spending before considering an increase in taxes.

“There is a long way to go in trimming and reforming state
government,” said Tricia Kinley of the Michigan Chamber of
Commerce. “We don’t believe any tax increases are
necessary.”

The Michigan chamber joined forces yesterday with several other
groups, including the Michigan Retailers Association and the
Michigan Grocers Association, to oppose the cigarette tax hike.

The coalition, which calls itself the Michigan Business Alliance
for Fair Taxes, said the tax increase could lead to lost jobs for
small and mid-size retailers.

The coalition predicted more Michigan residents would travel to
other states to buy cheaper cigarettes and illegally bring them
back into the state.

That could especially harm small retailers near the Ohio and
Indiana borders, it said.

The Michigan chamber also opposes the cigarette tax hike because
it would cancel a law that allows the state’s Single Business
Tax rate to resume annual reductions once the state’s rainy
day fund has a $250 million balance.

The Granholm administration predicts that more than 150,000 of
the residents in the state of Michigan would quit smoking if the
tax increase passes.

That is a crucial step toward a long-term reduction in state
Medicaid and health care costs, Granholm spokeswoman Liz Boyd
said.

Granholm has proposed more in cuts and savings than in revenue
enhancements for next budget year, Boyd said.

“It’s not as though the governor is afraid to make
cuts,” Boyd said. “She is not.”

It is unclear if the cigarette tax hike can pass in its current
form.

Some Republicans say they’d prefer to cut budgets first,
then decide how large of a cigarette tax increase is needed.

Senate Majority Leader Ken Sikkema (R-Wyoming) has supported
past cigarette tax increases and is not opposed to another
increase, spokesman Bill Nowling said.

But it remains to be seen what level of tax increase would be
supported, Nowling said.

House Speaker Rick Johnson (R-LeRoy) has proposed an increase of
81 cents per pack that would make Michigan’s cigarette tax
the highest in the nation at $2.06.

But Johnson may have to work around opposition in his own party
to push that through.

House Commerce Committee Chairman Clark Bisbee (R-Jackson) has
said he won’t allow his panel to send the cigarette tax
increase bill to the full House.

Johnson could direct the bill to another committee or have it
sent directly to the Michigan House floor.

There also have been suggestions that if other sources of
revenue could be found — such as allowing video slot machines
at Michigan horse tracks — support for the cigarette tax
could wane.

“To suggest they are tied together is too strong,”
said state Rep. Jack Minore (D-Flint).

“But is there some linkage in some peoples’ minds?
Yes.”

Allowing horse tracks to offer more types of gambling also has
drawn opponents.

Polls indicate the cigarette tax increase has broad public
support.

“It is supported even by some smokers, because it could
help them quit,” said Ronald Davis, director of the Center
for Health Promotion and Disease Prevention at Henry Ford Health
System in Detroit.

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