Future of Cigarette Tax Uncertain

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Washington--The nation's governors, looking for revenue sources to finance education reform, came away from their winter meeting here last week with mixed signals on an eight-cent federal cigarette tax that is scheduled to expire on Oct. 1.

Gov. Madeleine Kunin of Vermont, one of a half-dozen state executives who have proposed picking up the tax at the state level and using it to finance school reform, said that Donald T. Regan, the White House chief of staff, and David A. Stockman, the Administration's budget director, had personally assured her that the federal tax would be allowed to expire.

But Senate Majority Leader Robert J. Dole, Republican of Kansas, speaking to the governors on the first day of their meeting, told them not to count on expiration of the tax. Senator Bob Packwood, Republican of Oregon and chairman of the Finance Committee, said much the3same thing the week before.

"My guess is they're going to take back the eight cents they were going to give to us," said Gov. James Thompson of Illinois, the most recent of the governors to propose state assumption of the tax for education reform.

Not Going To Worry

Governor Thompson said he was not going "to sit back and worry" about what happens at the federal level. "My priority is to support education at this point, and I'm not going to sit back in paralysis because I don't know what's coming from the feds," the Governor said.

If the federal tax is maintained, "we'll have to find another revenue source," he said.

New England Solution

According to the Washington-based Tobacco Institute, more than half the states are expected to consider increased taxes on cigarettes this year. Two states--Maine and Kansas--have already passed legislation to adopt the tax and devote its revenues to reform. (See Education Week, Feb. 6, 1985.)

In both states, the tax increase is scheduled to go into effect regardless of what happens at the federal level. But in Maine, legislators have moved to make adoption of the tax contingent on expiration of the federal tax.

Brennan's Opposition Clear

Speaking in Washington, Gov. Joseph E. Brennan of Maine stopped short of saying he would veto such legislation, but he made his opposition to it clear.

Both Mr. Brennan and Ms. Kunin expressed interest in a regional agreement to raise the eight-cent tax, in the event that the federal tax does not expire. An aide to New Hampshire's governor, John Sununu, recently suggested the possibility of a regional tax.

"That of course is the ideal situation," Governor Kunin said.

"I'd certainly be interested in that," Governor Brennan said.


Vol. 04, Issue 24

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