Students, Keller Hospital main beneficiaries of tobacco taxes

While Shoals cities send all their tobacco tax revenue to their respective general funds, county governments have specific purposes for the money raised by the sale of cigarettes, cigars, chewing tobacco and other products.

Tobacco taxes are commonly referred to as “sin taxes,” because they’re derived from the sale of products or activities that are frowned upon by some members of a community.

Taxes on alcohol also fall into this category, and in some cases, taxes on soft drinks are considered sin taxes.

Regardless of its origin, the money can provide a revenue boost to cash-strapped cities and counties.

Florence, Muscle Shoals, Sheffield and Tuscumbia place their tobacco tax revenue into their general funds where it is used for help pay for various city functions.

Sin taxes have been used to pay for stadiums in the U.S., while in Sweden taxes on gambling are used to help people with gambling problems.

“It’s not huge,” Sheffield City Clerk Clayton Kelly said. “But $70,000, $80,000 hits you pretty hard if you didn’t have it.”

Unlike the cities, Colbert, Franklin and Lauderdale counties have specific purposes for their tobacco tax revenue.

Of the three, Franklin County is the most creative, using tobacco taxes to fund a college scholarship program and to provide additional money to the Franklin County Fire and Rescue Squad and the Franklin County Water Authority.

“None of it goes into our general fund,” Franklin County Administrator Crista Martin said.

Martin said the Franklin County Scholarship Fund is open to any Franklin County resident who is attending college in Alabama. The applicant must be a full-time student and maintain a 2.0 grade point average, she said.

The amounts of the scholarships vary depending on how much money is in the fund and the number of scholarship applicants, Martin said.

Martin said the scholarships are awarded annually for spring and fall semesters. Approved applicants will receive their money after they complete the semesters they applied for. The deadline to apply is June 30, and students can reapply each year.

“When it first started, there was a good bit more money in it than there is now,” Martin said. “When you have 100-150 people who apply and meet the criteria, it depletes the fund.”

Helen Keller Hospital is the sole beneficiary of tobacco taxes in Colbert County after the cost of purchasing tax stamps and paying someone to administer the program is deducted.

The tax was created in 1957 and was known as the “Colbert County Public Hospital Tax.” The proceeds of the tax were to be used for “acquiring, constructing, equipping, enlarging, improving, operating and maintaining” a hospital in Colbert County.

The act was amended in 1994 to add a 5-cent tax on “little cigars.”

In addition to the tobacco tax revenue, a 1982 legislative act provides that two-fifths of the county’s local beer tax revenue is earmarked for the county’s hospital fund.

The hospital received about $230,000 in 2010 from the county in the form of tobacco and beer taxes.

The act regarding beer was sponsored by the late Rep. Joe Goodwin, D-Muscle Shoals, when Colbert County voters approved the legal sale of alcohol in 1982.

Colbert County, Muscle Shoals, Sheffield and Tuscumbia school systems each receive one-tenth of the beer taxes and one-fifth goes to the county’s general fund.

James Brumley, the county’s general fund accountant, said total tobacco taxes have fallen slightly during the past couple of years while the cost of collecting the taxes has increased.

The amount of tobacco tax revenue going to the hospital has decreased from $109,856 in 2004 to $35,531 in 2010.

“The cost of collecting the tax has gone up a good bit with the increasing cost of printing the actual stamps that are placed on the tobacco products.” Brumley said. “This explains the reduction in monies that the hospital actually receives and the fluctuations.”

Colbert County Commissioner Jimmy Gardiner said he knew the hospital received a portion of the county’s beer tax revenue, but not the tobacco taxes.

“I was not aware it was that much of the tobacco taxes,” he said. “With the deficits at Keller Hospital, they need that more than ever right now.”

A Keller Hospital spokeswoman said the sin tax revenue is placed in the hospital’s general fund.

Lauderdale County Administrator Jenoice Bevis said tobacco taxes are split between the county and Florence city school systems after expenses are deducted.

“There was an act that set ours up,” Bevis said. “It doesn’t generate a lot of money.”