Vermont governor, lawmakers at odds over taxing cigarettes, dentists

Still haggling over how to close a $176 million budget gap, Vermont lawmakers and Gov. Peter Shumlin are at odds over whether to boost taxes on cigarettes and a separate plan to extend a provider "assessment" already in place for other health care providers to dentists.

The Senate Finance Committee has passed legislation that would add a $1-per-pack tax to Vermont's cigarette tax, but Shumlin opposes it.

The Democratic governor said Wednesday the state's tax revenues would take a hit because people would go to New York and Massachusetts to buy their cigarettes. Vermont would lose out on tax revenue from both the purchases of cigarettes and anything else smokers might buy in the same transaction, he said.

Currently, Vermont's per-pack cigarette tax is among the region's lowest, at $2.24. If the $1 boost is approved, it would go to $3.24.

New York's tax is $4.35 per pack, and Massachusetts' is $2.51.

"We know that right now, we're getting more sales, more people doing business in Vermont stores, because we're lower than our two big neighbors — New York and Massachusetts," Shumlin said Wednesday. "When we're higher than them, we lose those sales."

Tina Zuk, coordinator of the Coalition for a Tobacco Free Vermont, told lawmakers earlier this month that higher taxes on tobacco discourage its use. She says the annual price tag for smoking-related problems and loss of productivity from it is $425 million in Vermont.

Instead of the cigarette tax boost, Shumlin wants lawmakers to sign off on a 3 percent provider tax on dentists, which would help the state draw down about $4 million in federal funds that would help improve Medicaid and Medicare reimbursement rates.

State Senate President Pro Tem John Campbell says he'd rather not tax those services because they provide a benefit to Vermonters' health.

He says taxing cigarettes makes more sense because it would tax a habit that contributes to rising government health care expenditures.

"Dental health is a key component to our physical health," said state Senate President Pro Tem John Campbell. "I would rather not tax something that is providing a benefit to our physical health and at the same time tax something that we know is harmful and that will end up causing more medical costs, whether it be emphysema or cancers or what have you. To me, it's a no-brainer," said Campbell, D-Windsor.