The Lingle administration says new state taxes on cigarettes and other tobacco products may have to wait because of possible flaws in a bill vetoed by the governor, but overridden by lawmakers.
HB 895 increases the tax on tobacco products like chewing tobacco and cigars, but keeps cigarette taxes at the current level of 10 cents per cigarette.
Since the bill became law after HB 1175, which raises the cigarette tax to 13 cents per cigarette on July 1, the administration believes it takes precedence.
“We're going to have to talk to our attorneys about…whether we can implement the cigarette tax bill and how these two really irreconcilable pieces of legislation that the legislature passed work against each other,” said Linda Smith, the governor’s senior policy advisor.
The state attorney general’s office is looking into the growing controversy and is expected to issue a legal opinion on which piece of legislation must be followed.
“Normally it's the order which (bills) are passed,” said Smith. “So if the cigarette bill passed first, which it did, and now this bill which lowers the cigarette tax passed second, then presumably that's the effect of law.”
In her veto message May 7, Gov. Lingle wrote that HB 895 “is objectionable because it contains major technical flaws that defeat the purpose of the legislation and will make it virtually impossible to implement.”
The president of the Tax Foundation of Hawaii studied both pieces of legislation and came to the same conclusion as the administration. Lowell Kalapa says HB 895 appears to be the bill governing the taxation of cigarettes as well as products like chewing tobacco and cigars.
“So what happens is that second bill nullifies the tax increase on cigarettes because it is now the latest law to become effective and what it did was retain the cigarette tax rates prior to the cigarette tax increase bill.”
HB 895 also appears to provide a tax holiday on tobacco products other than cigarettes.
"So this would be like snuff, cigars, pipe tobacco (and) chewing tobacco between now and September 30 of this year,” Smith said.
“And that's because the legislature did not specifically define those products within the definitions of the law and then passed tax increases that go into effect October 1,” Added Kalapa.
Lawmakers are counting on the increase in the cigarette tax to net $22.5 million in fiscal year 2010, which begins July 1.
Members of the Hawaii Smokers Alliance, a grassroots organization dedicated to preserving the rights of smokers, cheered the fact that the tax may be in jeopardy.
“We are very, very pleased with this outcome,” said Jolyn Tenn, the group’s co-chair. “Unless they're going to call a special session and fix it, they're going to have to wait till next session and write it correctly.”
But lawmakers who overrode the governor’s veto of HB 895 are confident the legislation will pass legal muster. House Speaker Calvin Say told Khon2 legislative attorneys assured members of the bill’s legal standing.
"Our attorneys feel very, very comfortable with our position,” said Say. “We will wait for the attorney general's opinion.”
Andrew may be reached at ph. 591-4263.
