The Virginia General Assembly passed legislation in early 2020 to allow county governments to impose a tax on cigarettes—as cities and towns are already allowed to do—and counties across the Commonwealth are jumping at the opportunity. The law authorizes counties to charge smokers up to 40 cents per pack, and Albemarle county officials are aiming for the tax to be imposed here beginning in January of 2022.
The state is encouraging the formation of regional cigarette tax boards of at least six localities to take on the job of managing the new tax. David Blount, deputy director of the Thomas Jefferson Planning District Commission (TJPDC), explained the process in an April 1 meeting of the commission. “A regional board would have responsibilities such as stamping [placing official tax stamps on packages], collecting revenues, distributing revenues out, etc.,” said Blount.
“Over the past several months we’ve had a number of conversations with the Northern Virginia Cigarette Tax Board which administers the tax for 19 localities—mostly towns and cities—and we’ve talked with legal counsel so we can step into this type of arena,” he said. Treasury officials from the City of Charlottesville, which already has a 55 cents per pack cigarette tax in place, have also shared with the TJPDC how they first implemented and now administer their program.
The TJPDC encompasses a region that includes five counties (Albemarle, Fluvanna, Greene, Nelson, and Louisa) and the City of Charlottesville. “We have been gauging interest among our jurisdictions in pursing a regional effort, and have been number-crunching to project revenues and expenses for the various counties,” said Blount. “We’ve also cast a wider net to counties that adjoin our member counties to ask about their interest in joining our effort.”
Statewide, interest is high. Counties such as King George and Clarke have already formed boards and begun collecting cigarette taxes ranging from 20 to 40 cents per pack. Among the TJPDC members, no opposition was voiced at the April 1 meeting. Andrea Wilkinson, one of two Greene county representatives on the commission, said the tax would seem to be a good fit for Greene.
“When we put in a meals tax because citizens didn’t like the drive-by [where people passing through used services but did not contribute to county revenue], that took the burden off real estate taxes,” said Wilkinson, and she anticipated that cigarette taxes would fill the same role. TJPDC staff estimated that Greene would collect about $180,000 from the tax.
Donna Price, one of two Albemarle representatives, said the county was interested though she cautioned that the tax would not likely generate a reduction in property tax rates. “We see it as a nice addition,” said Price, “but candidly we don’t expect that this is going to be a windfall financially in any respect. We see it as a period of diminishing returns as cigarette consumption declines. My initial thoughts (as just one Supervisor) are to look at designating a substantial portion of the revenue towards a health and equity objective. Use of tobacco products is a known health risk, so my thoughts would be to use the funds towards improving health objectives within the county.”
Force of habit
Albemarle’s new county tax will be stacked on top of a state tax of 60 cents per pack (just doubled last year) and a federal tax of $1.01 per pack. While most smokers feel beleaguered by the constant financial pressure to quit, a few—like Crozet resident Claire Fisher—accept it as a penalty for a bad habit.
“I see smokers talk about it online and they’re mad [about increased taxes],” said Fisher, “so I know that I speak for a minority when I say I think that you should tax the things that are optional and harmful and that harm people around you, like cigarettes. [The tax] is meant to discourage people in kind of a harsh, tough love kind of way, but when it comes to something as gross as cigarettes, I can’t defend it and I’ve definitely found myself believing ‘I deserve it’ in the past few years, too.” Even so, she is skeptical about both the efficacy of a tax increase and the intentions of county lawmakers.
“[Forty cents] is definitely not a large enough amount to make a difference,” said Fisher. “The government is trying to manipulate people’s behavior here, but I don’t think that [increasing taxes] will do it. I have traveled and have seen the way people in other countries live, and it’s going to have to be a complete change in education and mentality and culture, honestly.” She also wonders if the tax will be just another source of general revenue for the county. “What assurances are we given that that money will be dedicated to education?” she said. “I think it’s just a way to lobby or promote the idea to the public.”
Smokers face a unique social stigma that people who indulge in other unhealthy habits—from consuming alcohol to gorging on fast food and sodas—do not. “I’ve been targeted the whole time I’ve been a smoker,” said Fisher. “While [smokers] are keenly aware that this is because of the health implications discovered in the past few decades, we’re not even allowed to smoke outside in a large and rapidly growing number of public places. When I travel or go to an event and I choose to hide around a corner to smoke, 90% of the time I meet the most interesting people there in the smoker’s section. We know, yes, this is awful but it’s the world we live in, and it makes sense to see a ‘smoker community’ band together.”
Though the new tax has not yet been approved in Albemarle, county officials have already placed a projection for cigarette tax revenue of $516,000 in the 2021-22 budget, which represents only a half-year of tax receipts because the expected January, 2022, effective date falls halfway through the county’s fiscal year. “The estimate was calculated based on the county’s population, using the number of packs sold per person in Charlottesville as an initial guide,” said Lori Allshouse, Albemarle’s Assistant Chief Financial Officer for Policy and Partnerships.
For comparison, Charlottes-ville’s 2020-21 budget included $575,000 for cigarette tax revenue (declining from $671,000 in 2018-19), which computes to about 23 packs of cigarettes purchased per person per year (averaged across the whole population of both smokers and non-smokers). Albemarle has a lower rate of smoking than does Charlottesville, but has more than twice the city’s population. While Charlottesville smokers can currently avoid the city’s tax by driving into the county to make their purchases, that option will be foreclosed with the proposed regional tax adoption.
A 2019 study by the Thomas Jefferson Institute examined how effective cigarette taxes are as revenue-raising tools for local governments in Virginia, and concluded that “rarely if ever does a jurisdiction meet its tax projections over the years after cigarette taxes are imposed or increased.” In fact, data from 27 localities around the state revealed a negative effect from the tax: between 2010 and 2016, “Virginia’s local governments collected 23 percent less in cigarette tax revenue over this period, even though these governments raised cigarette tax rates more than 50 times over the same period.”
The study also points out the tax’s impact on lower-income populations, noting that “53% of smokers make less than $30,000 a year,” and that “households earning less than $10,000 per year spend 5.8% of their income on tobacco projects.” Looking at the effect on local small businesses of taxing cigarette purchases, the report stated that “cigarette sales comprise 37.4 percent of an average convenience store’s monthly merchandise sales, and comprise 18 percent of an average store’s gross profit.”
Looking ahead, once the TJPDC collects resolutions of interest from its own and surrounding jurisdictions about their interest in joining a regional board, Blount said the next steps will be to execute a Memorandum of Agreement with each county, and the counties will then have to put a local ordinance on their books (no referendum is necessary). “By June or July, we want to be looking at what will the makeup of a board look like, what’s the legal framework, and then be ready to roll by January 1,” said Blount.