Gradual $1.75 cigarette tax hike in compromise bill

Smokers would soon need to cough up more money to puff a cigarette as the House of Representatives is likely to pass today a “compromise” bill increasing the CNMI’s cigarette tax from the current $2 to $2.75 for three years, and then to $3.75 after that. That’s a total of $1.75 increase, but spread out in four years instead of an outright $2 increase as originally intended.

Because it’s a product of a conference committee, the bill is expected to pass the House and Senate within days of each other and find its way to the governor for action.

“Senate and House members reached a compromise on this cigarette tax bill. The compromise is to make it a gradual increase instead of the original bill’s intent to increase the tax by $2 right away,” Fiscal Affairs Committee chair Jovita Taimanao (Ind-Rota) told Saipan Tribune.

A pack of cigarettes that retails for $3.75 right now could go up to $4.50 once this bill becomes law, and then to $5.50 after the third year.

The gradual increase in cigarette tax was not the only compromise reached among six House and Senate members.

Senate and House conferees agreed to reserve 3 percent of excise taxes collected for cancer treatment and programs. Those funds would have to be deposited in a separate Cancer Fund Special Account separate from the general fund, “to be appropriated to provide financial assistance to non-profit and governmental organizations that provide patient directed services for the prevention of cancers, its treatment, diagnosis, and other services that may be required to access treatment, including but not limited to, off-island transportation and temporary housing.”

That 3 percent was derived from a decrease in excise tax percentage collected for the solid waste management program, from 10 percent to now 7 percent.

Moreover, 50 percent of all excise taxes collected under this is supposed to be deposited into an account to fund the payment of the CNMI government’s share of the Group Health and Life Insurance benefits and for enforcement.

House floor leader Ralph Demapan (Cov-Saipan), author of the original bill, said cigarette smoking results in a high cost to society in increased illness and a reduction in life expectancy.

The U.S. Centers for Disease Control and Prevention’s estimates show that total smoking-caused health costs and lost productivity totals more than $10.28 per pack nationwide, Demapan said.

A 23-year-old smoker said yesterday the immediate 75-cent increase in cigarette tax would make a number of smokers think twice before smoking.

He said the $3.75 a pack he buys right now could go up to $4.50, “and that would have an impact” on one’s wallet.

Arnaldo “Mando” Guban, resident manager of Western Sales Trading Co. or WSTCO, the biggest cigarette wholesaler in the CNMI, said last night that the compromise cigarette tax increase bill is more bearable than the original proposal. WSTCO carries the brands Camel, Capri, Kool, Pall Mall and Doral, among other things.

Guban said it’s a big relief that the immediate increase would only be 75 cents rather than $2.

“If you increase the tax by $2 at one time, cigarette sales would suffer. Also, the bottom line is, any increase would be borne by the consumers,” he told Saipan Tribune.

Demapan introduced this health and revenue-generating bill 11 months ago.