NASHVILLE, Tenn. -- In his first veto since taking office in January 2003, Tennessee Governor Phil Bredesen rejected a controversial bill that would have added 50 cents to the price of a pack of the lowest-priced cigarettes in the state while posing, in his words, a substantial and serious threat to payments the state is receiving under the Master Settlement Agreement (MSA) with tobacco companies.
This is a complex issue that raises a number of complex legal questions, said Bredesen. This veto falls on the side of caution.
As [image-nocss] introduced, Senate Bill 2002 would have broadly taxed cigarette, liquor, wine and beer sales to raise money for TennCare, a state-run health-care program. The measure stalled in legislative committees, but in late May was amendedwith the backing of R.J. Reynolds Tobacco Co.to focus the tax on small cigarette-makers who are nonparticipating manufacturers under the MSA.
Approved by both the State House and Senate, the bill would have tacked an extra 50 cents on the price of a pack and $5 on a carton of cigarettes made by non-participating MSA tobacco-manufacturers. That money would have gone to the TennCare fund.
Clark Corson, chairman of the Council of Independent Tobacco Manufacturers of America, commended Bredesen for vetoing the bill. This veto will ensure that excise revenues from cigarette products continue to flow into the state treasury as adult smokers will not be tempted to buy their favorite discount brands in the bordering states or from Internet vendors, said Corson, who voiced the smaller tobacco companies' opposition to the bill.
Corson has blamed RJR's support of the billsupport Corson said was part of an effort to drive smaller tobacco companies out of businessfor the proposed law getting as far as it did.
RJR spokesperson David Howard told CSP Daily News the company was surprised and disappointed by the governor's veto. We definitely believe that the matter that was received and approved by the state legislature was based on solid financial and constitutional grounds, he said. Clearly the legislators realized they had a vested interest in this. All the MSA states, including Tennessee, have lost billions of dollars in revenue as a result of the nonparticipating manufacturers not signing onto the MSA. We are positive that as passed by the Tennessee legislature and enacted into law in other states, this equity-fee legislation is consistent with the MSA and it does generate needed revenue for the state.
Such a fee is already being assessed in Alaska, Michigan and Utah.
Meanwhile, Bredesen said Tennessee will need to tighten its belt to make up for the money it will not receive because of the veto. We're talking about a relatively modest amount of money that will be fully absorbed with small reductions in other areas of the budget, he said. This veto won't undermine our efforts to strengthen the health-care safety net.
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