As the state faces another budget shortfall estimated at $200
million, the Michigan House of Representatives is gearing up to
vote on a cigarette tax increase of 75 cents per pack, which
supporters say would raise much needed revenue.

Gov. Jennifer Granholm included the tax increase as part of her
budget proposal for the Fiscal Year 2004-05.

Matt Resch, spokesman for House Speaker Rick Johnson (R-LeRoy),
said Johnson has filed a discharge motion releasing the bill from
committee and bringing it to the House floor for a vote after
Easter recess.

“It’s going to be close no matter when it comes
up,” Resch said.

Proponents of the tax hike say it provides an immediate solution
to the state’s budget woes by increasing the state’s
revenue inflows, which have been lower than predicted due to the
poor economy and high state unemployment, State Budget Director
Greg Bird said.

“While we don’t know the exact size of the
shortfall, it is clear we will have a significant shortfall,”
Bird said. “The sooner we enact the (cigarette) tax, the
sooner we can start realizing the revenue. While it may not wipe
out the entire shortfall, it would be a significant
help.”

The tax is estimated to increase revenue $295 million, $30
million of which would be set aside for smoking prevention and
cessation programs.

The tax increase is opposed by a coalition of state businesses,
including the Michigan Chamber of Commerce, which predicts that
state residents will travel to other states such as Ohio to buy
cheaper cigarettes.

Many state Republicans who oppose the bill advocate spending
decreases instead of tax increases to resolve the budget
crunch.

Bird said the actual size of the deficit depends on taxes
collected this month.

“There are a number of revenues that have not come in as
expected,” he said. But he added that April is a crucial
month for the state budget because taxes can either bring in either
substantial or lower than expected revenues.

The state constitution mandates that Michigan have a balanced
budget each fiscal year. Since the current fiscal year ends Sept.
30, Bird said he expects the Legislature to move quickly on the
issue of revenue enhancement.

Granholm spokeswoman Liz Boyd, said the Governor does not want
to speculate on budget deficits until after the revenue estimating
conference on May 18 when state economists will predict how much
revenue the state will bring in.

“Certainly we are anxious to hear what they have to say
about the state of our economy and our budget,” Boyd said.
“The cigarette tax is obviously on the table. We are anxious
for state lawmakers to pass the bill,” she added.

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