Vincent Rosty smokes a cigar he bummed off a fellow carny during a break while working at the 2016 Central Wyoming Fair & Rodeo in Casper. Lawmakers have proposed raising the cigarette tax by $1 a pack.

CHEYENNE — Smokers in Wyoming would pay an additional $1 per pack and roughly $10 more per carton under a measure given a tentative green light by the Legislature’s revenue committee.

At 60 cents, Wyoming has one of the lowest cigarette taxes in the nation, and on Monday, public health concerns aligned with a need to bring more cash into public coffers amid the roughly $700 million budget deficit. Lawmakers decided to move forward the cigarette tax bill that was effectively tabled during the revenue committee’s August meeting.

“It raises the cigarette tax to about the national average,” said Rep. Cathy Connolly, D-Laramie, the bill’s sponsor. Connolly said projections show it generating an additional $26 million per year. “To me, that’s not chump change,” she added.

Committee members narrowly voted 7 to 6 to consider at their December meeting whether to recommend the $1 cigarette tax increase to the full Legislature. The bill will be debated and voted on at that meeting along with a host of other tax measures, including one on tourism and increases on liquor taxes.

Concerns about reservation

But the decision to move forward came with an important caveat: the state must negotiate a tax-sharing arrangement with the Eastern Shoshone and Northern Arapaho tribes on the Wind River Reservation. Tribal-owned businesses on the reservation are exempt from state taxes and retailers in Fremont County, adjacent to the reservation, fear losing business if the cigarette tax goes up.

Concerns over what to do about cigarette sales on the reservation effectively submarined consideration of the cigarette tax at the August meeting. But Sen. Cale Case, R-Lander, successfully amended the bill on Monday to make it mandatory that the state reach a deal with the tribes that tax cigarettes sold on the reservation and remit a portion of those funds to the state. If the state cannot reach an agreement, the tax will not be imposed anywhere in Wyoming.

Case said this was important both to ensure that whatever health impacts come from raising the tax across the state also apply to the reservation and would allow convenience stores near the reservation to stay competitive.

“In a lot of small towns around Wyoming, the convenience store is one of the only things that’s left in them — which is sad — but cigarettes are a big part of why they’re there,” Case said.

While Case’s amendment passed overwhelmingly, Sen. Affie Ellis, R-Cheyenne, opposed the measure. Ellis said she was concerned that it would force the Eastern Shoshone and Northern Arapaho tribes to impose a tax identical to the state’s tax when they might prefer to levy a higher or lower cigarette tax just like Wyoming’s neighboring states have the option of doing.

Connolly objected to making the tax increase contingent on an agreement with the tribes because, she said, it was illegal for non-tribal members to purchase cigarettes on the reservation and lawmakers should not take the actions of lawbreakers into account.

“You’re basically saying you think it’ll happen and we need to accommodate it,” Connolly said. “We never need to accommodate illegal behavior.”

Revenue department director Dan Noble said that while wholesale distributors are required to pay taxes on tobacco products, it is not technically illegal for Wyoming residents to purchase cigarettes on the reservation.

Noble said that without an agreement with the tribes, the state was limited in its ability to enforce cigarette taxes on the reservation. The state does not have the jurisdiction to impose taxes on the reservation, but because it is entirely surrounded by Wyoming, Noble said it would be possible — through a messy process — to seize and confiscate tobacco products as they were transported to Wind River.

Ellis warned against using such confrontational tactics, which she said have backfired elsewhere in the country.

“They create damaging relationships between states and tribes, one that are very difficult to overcome,” Ellis said. “I think we need to have a more comprehensive look at this issue before we have a very volatile issue that damages our relationship with the tribes.”

Lobbyists face off

Lobbyists representing both public health organizations and retailers showed up on opposite sides of the issue.

Jason Minser, government relations director at the American Cancer Society, said his organization supported the bill because the $1 increase was sufficient to cut down on smoking rates rather than simply raise additional revenue.

The American Cancer Society has opposed more modest increases in the past, including an unsuccessful proposal during last year’s legislative session to raise the tax by just 30 cents.

Rep. Mike Madden, R-Buffalo, was the sponsor of that 30-cent increase, which would represent simple inflation from the last cigarette tax increase 15 years ago, attempted on Monday to change Connolly’s bill from the $1 increase and application to all tobacco products back to a 30-cent increase and only on cigarettes. His amendment was defeated 6 to 7.

Minser said that any increase of less than $1 was generally absorbed by tobacco producers and distributors who work to discount products so that consumers see the price increase by just a few cents per year and would not convince anyone to quit smoking or not start in the first place.

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“If you put forward a bill that is over a dollar, you’re doing some other things,” Minser said. “Adults will quit, kids will quit who currently smoke … potential smokers or kids who are picking up a cigarette for the first time are very price sensitive as well.”

Wyoming’s cigarette tax is currently lower than every neighboring state with the exception of Idaho, where the tax is three cents lower, according to the Tax Foundation. If the Legislature raises the cigarette tax to $1.60, the tax would then be higher than Idaho, Nebraska and Colorado.

Mark Larson of the Wyoming Petroleum Marketers Association said that 21 percent of cigarette tax revenue in the state currently comes from out-of-state consumers who would presumably stop buying tobacco in Wyoming if the price went up.

Connolly said a $1 increase in the tax per pack is expected to reduce the smoking rate in Wyoming by about 5 percent.

Opposing the tax was Mike Moser, president of Wyoming State Liquor Association, who said retailers are already reeling from a 30 percent drop in sales during the economic bust and the cigarette tax is just one of several measures the Legislature is considering that would hurt businesses in the state including a tourism tax and eliminating the sales tax exemption for services.

Business owners are angry that the state has not cut more government spending before considering tax increases, he said.

“Retailers out there are hurting,” Moser said. “There are a lot of people hurting out there and there’s a lot of anger and a lot of rage.”

Future uncertainty

Because the revenue committee has been tasked by the Legislature’s leadership council with coming up with a variety of proposals to raise revenue, voting to consider the cigarette tax increase does not indicate that the committee will actually decide to sponsor such a tax at its December meeting.

It is also unclear whether the committee’s blessing would matter when the bill hits the full Legislature. After his attempt to lower the amount of the tax increase was defeated, Madden voted for the bill anyway but cautioned that most lawmakers were likely to reject any attempt to discourage smoking by passing such a steep increase in the tax.

“Social engineering taxation doesn’t work in Wyoming. We just don’t do that,” Madden said. “A bill like that never passes.”

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