BOISE, Idaho – Support among Idaho lawmakers for a proposed increase in the state’s tobacco tax could hinge on whether tribal retailers agree to impose the same tax on cigarettes sold at stores on reservations across the state.
Lawmakers are preparing legislation that would raise the state tax on cigarettes by $1.25 per pack, one of only a few potential sources of new revenue being considered during the 2011 Legislature.
The Lewiston Tribune reports the bill could include a provision to have tribes adopt the same increase. The state tax on cigarettes is now 57 cents per pack. While some tribes voluntarily charge an equivalent amount to the tax, tribes have latitude to control their own prices, and some charge a tax that is less than the state rate.
For example, the Coeur d’Alene Tribe in north Idaho charges only a 10-cent tax on each pack.
House Speaker Lawerence Denney, R-Midvale, told the Lewiston Tribune that the existing tax system creates differences in price that give tribal retailers an unfair advantage over their non-tribal counterparts.
“If the tax is exactly the same, there wouldn’t be a competitive advantage to buying cigarettes on the reservation,” Denney told the Tribune. “This is something joint leadership has been talking about since before the session began.”
With neighboring Washington state’s tax now up to over $3 a pack, smokers can benefit from making the 60-mile round-trip from cities such as Spokane, Wash., to reservation stores.
How much benefit the tribes actually derive from the current tax disparity is unclear. Denney said reservation sales account for more than 40 percent of all cigarettes sold in Idaho, even though American Indians make up just 1.6 percent of the population.
The state Attorney General’s Office put the sales figure closer to 10 percent, and the State Tax Commission said it’s about 20 percent, or 324 million out of the 1.76 billion cigarettes sold last year. Tribes are allowed to keep the tax collected on cigarette sales in Idaho.
Still, Coeur d’Alene Tribe Legislative Director Helo Hancock questions whether the state can legally require sovereign tribes to charge the higher tax.
“I think there would be significant legal obstacles,” Hancock said.
One method being used in states such as Montana and Washington to level the playing field is capping the number of un-taxed cigarettes that can be sold to each reservation.
The idea of increasing Idaho’s tax on tobacco is backed by a coalition of health organizations that claim smoking-related illnesses cost Idaho about $320 million per year. They project that raising Idaho’s tobacco tax by $1.25 would generate an estimated $51 million per year.