tampabay.com

A little tax between the cheek and gum

By HOWARD TROXLER
Published March 25, 2007


Do you recognize any of these brand names?

Copenhagen, Skoal, Red Seal, Husky, Kodiak, Cougar, Grizzly, Timberwolf, Longhorn, Kayak.

They're labels for "moist smokeless tobacco." It usually comes in round tins that range from over $4 a pop to discount brands for under $1.

Besides the major battles being waged in our Legislature this year, there's a spirited little war among the various smokeless brands.

One of the Big Four smokeless companies, U.S. Smokeless Tobacco (Skoal, Copenhagen) wants to change the way Florida taxes the product.

The other three companies prefer to keep things the way they are: R.J. Reynolds' sister company Conwood (Kodiak, Grizzly), Jacksonville's Swisher International (Silver Creek, Kayak, Redwood), and a foreign company called Swedish Match.

It comes down to the way Florida taxes "sin" and consumption - the type of levy known as an "excise" tax.

Buy a pack of cigarettes in Florida, and you pay a state excise tax of 33.9 cents, no matter if it's the fanciest smoke on the market. (You pay a sales tax too, but this fight is over the excise tax).

Not so with smokeless tobacco. Florida taxes it in a variable way - 25 percent of the wholesale price.

That's bad for high-end labels like Skoal and Copenhagen, but an advantage for "discount" brands that have rapidly grown in market share. Many customers have "traded down" to less expensive labels.

This brings us to House Bill 523 and Senate Bill 2402, which would switch Florida to a weight-based tax on smokeless tobacco. The Senate bill has a hearing Tuesday.

The effect would be to increase prices of the discount brands while making premium labels less expensive. Supposedly the state's take would stay about the same.

U.S. Smokeless contends it's about more than just gaining a leg up. Robert Shepherd, a consultant for the company, argues the switch would be better and simpler for tax collections, which have been snarled in lawsuits, and it would remove a loophole in which excise taxes can be lowered by fiddling with prices.

"Nobody would tolerate giving a tax subsidy to cheap cigarettes," Shepherd says.

Florida TaxWatch, the business-backed watchdog group, agrees in a position paper that "a uniform tax for all brands avoids erosion of the tax base."

Veteran lobbyist Ken Plante represents Swisher. "This is plainly and simply a way to grab some the market back," he says. Most states tax the product the way Florida does, and the state gets a benefit when prices go up, he says.

So, who to cheer for? If you agree with TaxWatch on the tax-policy question, or want a little break on your Skoal, then support the bills. If you want to keep the cheapest stuff cheap, oppose them.

And if you're a public-health advocate who wants to know why we're talking about which part of the tobacco industry to side with in the first place? Sorry, wrong number.

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