Tobacco Tax Hike to Fund Preschool Program?

President Obama's 2014 budget may include federal increase

WASHINGTON -- Tobacco companies and retailers are squaring off against anti-smoking groups over a federal cigarette tax increase to fund preschool programs even before President Barack Obama officially proposes it next week, according to a Bloomberg report.

A spokesperson for Reynolds American Inc. called a tax boost included in the president's 2014 budget proposal "ludicrous," said the report, while the president of Campaign for Tobacco-Free Kids said an increase would "save lives and save money."

Obama's proposed budget, to be released April 10, would finance a prekindergarten program for four-year-olds with higher taxes on cigarettes and other tobacco products. The president outlined the program in his annual State of the Union address to Congress. He is seeking to increase spending in areas such as education while Republican lawmakers are pushing for additional budget cuts as a way to reduce the federal deficit.

White House spokesperson Jay Carney declined to elaborate on the tobacco tax increase. "Wait for specifics," he told reporters.

Bryan Hatchell, a spokesperson for Winston-Salem, N.C.-based Reynolds, said the added levies would fall on the middle class that Obama has promised to protect from additional tax burdens.

"The idea of increasing taxes on low- to middle-income Americans at this time is ludicrous," Hatchell said. "As middle-income Americans struggle to make ends meet in a very slow economic recovery period, this is not the time to hit them with higher taxes."

Convenience stores would be hurt as higher taxes curb consumer spending, including on tobacco purchases that account for 40% of their nongasoline sales, Jeff Lenard, spokesperson for the National Association of Convenience Stores (NACS), told the news agency.

"It is not just the loss of sales, but also the loss of customers," he said.

Richmond, Va.-based tobacco-maker Altria Group Inc. also opposes an increase in the tax. "It is unfair to single out adult tobacco consumers with another federal tobacco tax increase to pay for a broad, new government spending program," David Sutton, a spokesperson for Altria, told Bloomberg.

Anti-smoking organizations praised the proposal, the report said.

"A significant tobacco tax increase is a win-win-win for the country--a health win that will reduce tobacco use and save lives, a financial win that will raise revenue to fund an important initiative and reduce tobacco-related health-care costs and a political win that is popular with voters," Matthew Myers, president of the Campaign for Tobacco-Free Kids, told the news agency.

The federal government currently taxes cigarettes at about $1 a pack, the toll having been increased by 61 cents in 2009.