Tag Archives: tobacco

House sub snubs raising legal age for smoking

NASHVILLE, Tenn. (AP) — An effort to raise Tennessee’s smoking age from 18 to 21 has been defeated in the state House.

The bill sponsored by Republican Rep. Bob Ramsey of Maryville (HB1978) failed to receive a motion in the House Agriculture Committee on Tuesday.

Ramsey, who worked on his family’s tobacco farm growing up, has said he introduced the bill over health concerns for Tennesseans.

Legislative analysts had projected that the measure would cost state and local governments about $10 million in lost revenue a year once fully implemented.

Tennessee’s tax on each pack of cigarettes was raised from 20 cents to 62 cents in 2007.

Hawaii is the only state that bans teenagers from smoking, but California lawmakers last week passed legislation to follow suit. That bill is awaiting the governor’s signature.

Inspired by Armstrong case, McCormick proposes bill on cigarette tax stamps

House Majority Leader Gerald McCormick has filed legislation inspired by state Rep. Joe Armstrong’s reported dealings in state cigarette tax stamps — allegations that led to the Knoxville lawmaker’s indictment on federal tax fraud charges.

The state’s political party leaders, meanwhile, have engaged in some back-and-forth partisan sniping over the legal troubles of Democrat Armstrong and Republican Rep. Jeremy Durham of Franklin, who was investigated for prescription drug fraud but not indicted.

McCormick, R-Chattanooga, introduced HB1440 last week. Armstrong was indicted in June and is facing trial Feb. 23.

Armstrong allegedly collaborated with a tobacco wholesaler to buy Tennessee cigarette tax stamps in 2007 before a tax increase that Armstrong supported. When the tax increase was enacted, the tax stamps were sold a profit of more than $500,000 and Armstrong failed to pay the appropriate federal income tax on that profit, the indictment alleges.

McCormick’s bill would require a tobacco wholesaler, in the case of a future cigarette tax increase, to promptly pay the extra tax on any stamps the dealer is holding at the time the tax increase occurs.
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Push for county cigarette tax referendum goes up in smoke

An effort to let Hamilton County voters decide whether to approve a 20 cent-per-pack cigarette tax to fund arts projects appears to have gone up in smoke, reports the Times-Free Press.

On Tuesday, Hamilton County Commission Chairman Chester Bankston said supporters didn’t get enough signatures from fellow commissioners to ask state lawmakers to push the issue in the Tennessee Legislature.

“It’s gone,” said Bankston, noting the letter needed a two-thirds majority — six signatures on the nine-member commission — to move forward. “It didn’t get enough signatures so I removed it. There just wasn’t enough support for it. There wasn’t enough support from [local legislators] and there wasn’t enough support here.”

Earlier Tuesday, Commissioner Marty Haynes, who opposed the issue, said the last time he looked at the letter request, he saw only five signatures.

The tax request was made in October by officials from ArtsBuild, a nonprofit organization that helps fund arts in Hamilton County. The group brought a draft resolution to commissioners’ public agenda session and a poll saying 63 percent of 503 county residents, given a chance, would support the proposed cigarette tax.

It was intended to fund programs ranging from arts festivals and choir performances to storytelling, poetry and dance throughout the county. Estimates said it would have generated $3 million to $4 million in new revenue annually.

Lee Davis, a local attorney and chairman of the ArtsBuild board, said Tuesday night the survey showed nearly two-thirds of those polled “were in favor of a cigarette tax to support arts, culture and education.”

“We’re asking the County Commission for permission to put it up on the ballot in August for an up or down vote by the county,” Davis said. “We felt it was a fair question to ask whether or not the county supported arts, culture” for education and economic development “which we’ve seen is an important issue.”

Armstrong once lobbied in Washington for tobacco wholesaler

State Rep. Joe Armstrong once worked with former state Sen. Bill Owen as a lobbyist in Washington for the tobacco wholesale company that had a problem with pending cigarette tax legislation in Congress, according to the News Sentinel.

That company now figures prominently in federal charges of fraud and tax evasion pending against Armstrong that involve a state cigarette tax increase enacted in 2007, a year before the Washington lobbying.

The problem: Tru Wholesale had a warehouse full of Bronco cigarettes in 2008. Congress was preparing to pass a bill that would raise the taxes owed on those cigarettes to help fund an increase in the availability of health insurance for children.

“They were going to get soaked for that increase,” former state Sen. Bill Owen explained Wednesday in an interview with the News Sentinel.

…In early 2008, federal court records allege, Tru Wholesale was funneling nearly $1 million in tax stamp profits owed Armstrong and Anderson through a firm owned by Armstrong’s accountant, Charles Marshall Stivers of Kentucky.

Stivers had been Armstrong’s accountant for years and served on the boards of Tengasco, an energy firm Armstrong founded, and of Miller Energy, public disclosure records show.

Tru Wholesale owners Boyd Wyatt and Roger Cox already employed Owen as a lobbyist. But Owen said the pair wanted a bit more influence and brought Armstrong, a nationally prominent black Democratic state legislator, on board.

“He knew the Tru Wholesale people, and he knew people in Congress,” Owen said.

…Owen crafted an “out-of-state consulting contract” with Armstrong and filed it with the Ethics Commission, records show. Owen said Armstrong traveled with him and Cox to Washington and lobbied Congressional leaders to drop the so-called floor tax hike.

…After the lobbying efforts of Armstrong and Owen, those records show the floor tax hike was eliminated altogether in the Senate final version.

“We reached a compromise,” Owen said.

…Owen did not say how much Armstrong was paid. Tru Wholesale picked up the tab for the travels and paid a fee to the two men, he said.

Owen is president and founder of Asset and Equity Corporation, a lobbying and consulting firm he has operated since 1987. Armstrong listed the firm as a source of income in his 2009 and 2010 financial disclosure forms.

Owen denied any knowledge of the tax stamp deal Armstrong allegedly brokered with Tru Wholesale but insisted neither that deal nor Armstrong’s paid lobbying of Congress while a sitting member of the Tennessee General Assembly were illegal or improper.

“Joe saw a situation developing and he took advantage of that,” Owen said. “That happens every day in the Legislature. That’s not a crime.”

Rep. Joe Armstrong indicted on fraud, tax evasion charges

From the News-Sentinel:
One of Tennessee’s and the nation’s most influential black state legislators bartered his vote on a cigarette tax hike for a cut in a scheme to hoard tax stamps at pre-hike prices and then sell them off once the Tennessee Legislature approved the bill, a federal indictment alleges.

State Rep. Joe Armstrong, D-Knoxville, who served as president of the National Black Caucus of State Legislators from 2012-2014 and twice was named the group’s Legislator of the Year, was indicted Wednesday in U.S. District Court.

Armstrong, 58, is charged in the indictment with conspiracy to defraud the U.S., tax evasion and lying to the IRS. He is expected to surrender to federal authorities Friday morning to be arraigned.

Court records show and Armstrong says in a statement provided by defense attorney Gregory P. Isaacs that he has been under investigation in the tax-stamp fraud case for “several years” — all while casting votes on legislation big and small, serving on the state House’s influential House Finance, Ways and Means Committee, heading the national black caucus and state democratic caucus and racking up prestigious awards.
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Legislature-mandated price markups deemed ‘pure cronyism’

By Erik Schelzig, Associated Press
NASHVILLE, Tenn. — Under a new state law, Tennessee retailers will have to charge smokers at least 15 percent more than the wholesale cost. The surcharge is theirs to keep.

That increase follows last year’s law requiring supermarkets to sell wine at least 20 percent above cost and another longstanding 10 percent markup on milk. State law refers to those margins as “the cost of doing business.”

Justin Owen, the head of the conservative Beacon Center think tank, on Wednesday called those markups a “hidden tax increase” — except that the proceeds are funneled to retailers instead of into state coffers.

“Minimum markups on products are pure cronyism,” Owen said in an email. “Product prices should be set based on what consumers are willing to pay and what retailers are willing to charge.

“Government has no business taking more money from consumers by force of law and handing it over to retailers,” he said.”

The markup on cigarettes was hiked from 8 percent to 15 percent, or the equivalent of an increase from 41 cents on each pack of cigarettes to 76 cents per pack over the next two years.
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Columnist laments legislators mandating bigger cigarette sale profits

From a Jack McElroy column in the News Sentinel:

Among the bills that slipped through the legislative session with little fanfare was Tennessee’s plan to reduce smoking by making it more profitable to sell cigarettes.

Read that sentence again, if you need to. The logic is tough to follow.

Lawmakers could have raised taxes on cigarettes from 62 cents a pack — 12th lowest in the nation. That, however, would have involved a — shudder — tax increase. Instead, the freedom-loving supermajority voted to force stores to raise prices.

It’s a win-windfall solution. Tobacco dealers will earn an extra $129 million a year when the price control is fully implemented.

This was achieved by manipulating the 1950s-era Unfair Cigarette Sales Law. The law was passed when cigarettes were advertised everywhere and a pack cost two bits. To protect small merchants from big stores using cigarettes as loss-leaders, states established minimum markups. In Tennessee, that markup was 8 percent over the retailer’s invoice cost.

There aren’t many small dealers left now. Cigarettes are sold by giant chains. Still, in recent years that 8 percent minimum markup hasn’t seemed like enough, and the retailers began lobbying for more.

…Sadly, minimum markups alone don’t do much to slow tobacco addition. A report by the Tobacco Control Legal Consortium points out that cigarette manufacturers — desperate to keep their hooks in the market — spend lavishly to counteract such price increases with promotional discounts. In 2006, for instance, the industry spent more than $9 billion on discounts.

A few states have addressed that by mandating that discounts can’t be used to offset their “unfair cigarette sales laws.”

Tennessee isn’t one.

Legislature mandates increased retailer profits on cigarette sales

Tennessee smokers will begin paying more for cigarettes on July 1 under a bill signed into law last week by Gov. Bill Haslam, reports the Times-Free Press.

The 15 cents-per-pack increase is the first of three that will total 35 cents by July 1, 2017.

The change is technically not a tax hike. What lawmakers have done is increase the minimum price mark-up over retailers’ “cost of doing business” for buying and selling a 20-cigarette pack.

The minimum now is 8 percent, or 41 cents per pack. That minimum will rise in three steps to 15 percent, or 76 cents per pack, over two years, according to a legislative fiscal analysis.

It’s an 85 percent increase in the minimum mark-up and its expected to sweeten retailers’ bottom lines by $129.22 million in year three, according to the analysis by the General Assembly’s Fiscal Review Committee. (Note: It’s HB225, sponsored by Rep. Pat Marsh, R-Shelbyville, and Sen. Rusty Crowe, R-Shelbyville.)

This is the first change in 65 years to Tennessee’s Unfair Cigarette Sales Law. Twenty-five states have such laws, passed largely in the 1940s to 1960s in the name of protecting smaller retailers from unfair competition by chains and large discount stores.

In this case, convenience and grocery stores, including chains, lobbied for the increase, saying major tobacco manufacturers were pressuring them to keep prices at or near the minimum mark-up.

But retailers weren’t alone in supporting the bill. Children’s health advocacy groups joined in, among them the Children’s Hospital Alliance of Tennessee, the March of Dimes and the Tennessee Chapter of the American Academy for Pediatrics. Research shows any hike in cigarette prices will spur smokers, especially kids, to kick the habit.

The average price of a pack is $5. The fiscal analysis estimates the change will decrease cigarette sales by 2.24 percent.

Emily LeRoy, executive director of the Tennessee Fuel & Convenience Store Association, said the increase is “good health legislation and it’s good for retailers.”

She said pressure from tobacco manufacturers to keep prices low meant convenience stores were making little to no money on a product that on average accounts for 20 percent of sales.

…The governor and his family hold major stakes in Pilot Flying J, the largest operator of travel centers and travel plazas in North America. Haslam’s older brother, James “Jimmy” Haslam III, is the privately held firm’s CEO.

And Pilot Flying J does sell cigarettes and is a member of the Tennessee Fuel & Convenience Store Association.

Asked about Haslam, LeRoy said, “I will tell you this, we try to be very cognizant of that impression. So we did not directly lobby the governor on this bill.”

David Smith, a Haslam spokesman, said the governor’s ties to Pilot Flying J “had no bearing on his decision to sign the bill.”

AFL-CIO eyes organizing TN tobacco farm workers

Prompted by concerns about the conditions faced by Tennessee tobacco workers, the farm labor organizing arm of the AFL-CIO is coming to Tennessee later this month and plans a full union membership campaign by next summer, according to The Tennessean.

The goal, said Baldemar Velasquez, president and founder of the AFL-CIO’s Farm Labor Organizing Committee, or FLOC, is to help workers navigate complaints, wage issues and disputes with employers or contractors.

“We want to offer them a helpline,” Velasquez said.

FLOC is targeting four tobacco-growing states, including North Carolina, Kentucky and Virginia, to unionize adults and teenage laborers. Organizers signed up more than 1,000 workers in North Carolina this summer but faced “a lot of intimidation, retaliation and harassment,” including one labor union organizer being handcuffed, Velasquez said.

They found poor conditions in the fields and many of the labor camps where workers lived, including “some farms where they treat farm animals better than the workers.”

Velasquez said his group believes pressures from big tobacco corporations are ultimately to blame for poor conditions facing workers.

State Department of Health frets about electronic cigarettes

The Tennessee Department of Health has issued a rare public health advisory urging caution on the use of electronic cigarettes and other electronic nicotine delivery systems, reports the Commercial Appeal.

The advisory also addresses concern about inadequate oversight of the manufacture of the products and about second-hand exposure to their vapors and emissions.

“There is inadequate scientific information about the effects of using current electronic nicotine delivery systems to assure the public about the impact to safety and health. Coupled with the absence of state or federal regulation of manufacture, this information should prompt consumers to be cautious about using the devices as well as exposure to secondhand emissions,” the advisory says.

Dr. David Reagan, the department’s chief medical officer, said Wednesday that his agency promotes smoking cessation but there’s not enough evidence about the products’ effectiveness in reducing smoking.

Note: The Department of Health advisory (pdf) is HERE.