All tobacco products should be taxed
Due to an arbitration decision involving the states' national settlement with major tobacco companies, Pennsylvania could lose 60 percent of its share - $180 million a year.
The reduction would start in April but to prepare for it the state immediately would freeze $25.6 million in payments to hospitals for uninsured patients' care, $8.5 million in prevention and cessation programs and an array of discretionary health research grants amounting, so far, to more than $12 million.
An arbitration panel of three retired federal judges ruled against the state government in a claim brought by tobacco companies, which alleged that Pennsylvania had not fully complied with terms of the settlement. The deal provides for participating companies to reduce their payments if they lose market share to companies that did not participate in the agreement.
The companies claimed, and the arbitration panel agreed, that the firms had lost market share to companies that produce roll-your-own tobacco, which Pennsylvania does not tax.
The state attorney general's office has appealed the decision. But as the case proceeds, the Corbett administration and the Legislature should be prepared to recoup at least some of the lost revenue through other means.
Pennsylvania should collect taxes on all tobacco products, including the loose tobacco at the center of the dispute. The commonwealth also is the only state not to impose a tax on cigars, a status that should have ended long ago.
Major tobacco companies also have begun to convert the niche e-cigarette business into a major business. The state should impose the same taxation regime on non-tobacco e-cigarettes, which heat nicotine into a vapor that can be inhaled, as on conventional cigarettes.
Ideally, the state will prevail on appeal and the full $300 million a year in payments will be restored. But since those payments will not go on forever even if the state wins the appeal, the governor and Legislature should maintain an aggressive posture against tobacco and ensure that there is adequate revenue to fight for public health.