In a high-stakes skirmish on taxes, lobbyists are dueling once more over legislation that would impose a 40-cent-per-pack tax on a Florida cigarette maker.
State Sen. Thad Altman's proposed bill has the deep-pocketed support of Big Tobacco companies, who say they want to "level the playing field" by requiring Dosal Tobacco Corp. to pay the same fees they've been paying since settling the state's tobacco lawsuit in 1997.
But Dosal, which has defeated similar efforts in previous sessions, continues to fight back. The Miami-based company says the tax threatens its business and could eliminate all or most of its 300 jobs.
Florida's politicians -- from Gov. Rick Scott on down -- remain in the middle. With Dosal contributing $750,000 to state candidates in the 2010 election cycle and Big Tobacco donating more than $1 million, lawmakers are feeling the heat on all sides.
Senate President Mike Haridopolos chose his words carefully during a recent press gathering, where he said:
"Some people have said that if businesses are in competition, everyone should pay the same tax rate. If everyone is selling the same product -- say, McDonalds and Burger King -- should they pay the same taxes? Most people say yes."
But pressed for his position, and a prediction on the outcome, the Merritt Island Republican averred, "It's too early to tell for sure." Then, when reminded of his no-new-taxes pledge, Haridopolos added:
"If it's the will of the Senate to pass something to bring [Dosal] into compliance, that would obviously be an increase. It would be my ambition to lower another tax by an equal amount."
Haridopolos, who is running for the GOP nomination for U.S. Senate, said previously that he regretted his 2009 votes to raise taxes on cigarettes.
Last year, Altman's Dosal bill, Senate Bill 2344, died in the Committee on Regulated Industries. His new bill has not been given a number yet.
House Speaker Dean Cannon, though he told an AP Editors meeting in January that the vote he most regretted was his vote for a cigarette tax increase, declined to comment on this year's prospects.
"The speaker does not comment on individual member bills as they move through the committee process out of respect for the bill sponsor and for the legislative process," said spokeswoman Katie Betta. Betta said she did not know of any upcoming House bills relating to Dosal.
Scott's office was mum as well. "The administration has not yet reviewed [Altman's] bill," said spokeswoman Jennifer Meale.
TAXING TO CORRECT A 'COMPETITIVE ADVANTAGE'
With each of the state's top three political leaders leaving themselves room to maneuver, Altman is carrying the ball for now.
Though the Melbourne Republican wasn't available for comment, supporters of the Dosal tax bill -- notably lobbyists for tobacco giant Philip Morris -- call it a matter of equity.
"First of all, it's a fee, not a tax," says David Sutton, a spokesman for Altria, the parent company of Philip Morris. "Big Tobacco paid Florida $390 million in fees last year, but a loophole still exists and it undermines the state's tobacco settlement."
Florida's $11.3 billion agreement was designed to defray the cost of treating smoking-related illnesses via Medicaid and other health programs. And at a time of budget deficits and sharply rising health-care costs, Big Tobacco has attracted allies in its campaign to, as Sutton puts it, "address an unintended competitive advantage."
Among those allies are the Associated Industries of Florida and the Florida Retail Federation. The Florida Chamber of Commerce has remained neutral.
Dominic Calabro, president of Florida TaxWatch, sees merit in the equity argument. "[Dosal] has a government-induced, approximate 55-cent price advantage," he said.
Calabro cited three factors that spur the annual renewal of Tallahassee's tobacco war:
"1. The need for more revenue has never been greater.
"2. There's an interest in revenues that are not seen as a broad-based tax increase.
"3. As Dosal grows, the equity question gets larger."
But, calling the tax issue "complicated," Calabro said TaxWatch has not taken a position on it ... yet
DEMOCRAT LOOKS FOR SCOTT TO LEAD
Barely a month before the 2011 Legislature convenes on March 8, few lawmakers would go on the record to declare their positions.
"No one wants to be branded as being for any cigarette company," one lobbyist said privately.
But Dosal appears to enjoy rock-solid support among both Republicans and Democrats in the hometown Miami-Dade delegation.
Those lawmakers include Senate Judiciary Chairwoman Anitere Flores, R-Miami; Rene Garcia, R-Hialeah; Miguel Diaz de la Portilla; R-Miami; and Rep. Luis Garcia, D-Miami.
Garcia calls the fee/tax gambit "grossly unfair" and warns that Dosal would be "crippled" if Altman's bill passes.
The Democrat challenged Scott to get out in front of the issue. "This is all about jobs, and the governor says he's all about jobs. Maybe he should intervene."
Garcia -- who, like Dosal's founders, hails from Cuba -- added that Republicans should oppose the Dosal measure on philosophical grounds. "If they can justify a tax increase, God bless them," he said.
But Garcia acknowledged that his fellow Democrats from outside South Florida, as well as some Republicans nervous about the state's $3.6 billion deficit, might buy into Big Tobacco's campaign.
"This could be the year [it passes]," Garcia predicted.
HOLD ON, THERE ARE MORE LOOPHOLES
Opponents of Altman's bill say the supposed financial windfall from a Dosal tax is fool's gold. In addition to killing Florida jobs, they predict it will benefit out-of-state cigarette brands and won't reduce smoking.
That's because Dosal wasn't the only party exempted from the original 1997 settlement. Liggett & Myers' discount "Select" line reportedly is not covered by the agreement, and smaller tobacco companies, such as Commonwealth Brands Inc., were excluded as "nonparticipating manufacturers."
Market analysts say that a 40-cent-a-pack tax slapped on Dosal will simply send smokers to those other brands, avoiding the state's tax net.
That scenario played out in Minnesota. When that state brought one previously "nonparticipating manufacturer" into its settlement and raised its prices, other exempted brands increased their market share and left St. Paul's coffers none the larger.
"If you took all of Dosal's market share and gave it to others in Florida, you would only bring in about $3 million to the state," said Mike Huey, a corporate lobbyist in Tallahassee. That's far short of proponents' projections, which range wildly from $30 million to $200 million per year.
Sarah Bascom, a Tallahassee-based spokeswoman for Dosal, said the cigarette maker's market share averages around 15 percent. Powered by its "305" brand, the company ranks as the second- or third-top seller in Florida. When the 1997 agreement was signed, Dosal accounted for barely 2 percent of the market.
Still, as with many other companies, Dosal's sales have decreased by 10 percent to 12 percent since 2009, Bascom said.
If a sluggish economy is driving Big Tobacco's ongoing campaign to dull Dosal's price advantage, the Miami cigarette maker maintains that its competitors are brazenly trying to rewrite the rules.
Noting that the company pays all applicable excise taxes, federal excise taxes, sales taxes, FDA user fees and USDA tobacco quota buyout fees, Dosal says it was dismissed from the 1997 settlement because, unlike its larger rivals, it did notparticipate in alleged acts of racketeering and fraud, did not misrepresent the health effects of smoking, did not advertise to the general public and never conspired to cover up scientific proof linking smoking to cancer.
SMOKING OUT SUPPORT IN TALLAHASSEE
For Florida's politicians, the question may come down to dollars -- including those laid out by lobbyists.
Altria's Sutton, who is based in North Carolina, makes frequent trips to Florida, and countless other lobbyists are again ramping up their case for "fairness." Meanwhile, a comparable phalanx of advocates is lining up to defend Dosal under the anti-tax banner.
Since 2000, Dosal has shelled out more than $1 million in lobbying fees. Big Tobacco -- notably Philip Morris, R.J. Reynolds and Lorillard -- is believed to have exceeded that sum.
Both sides made their presence felt at Scott's inauguration, to which Altria donated $25,000 and Dosal gave $10,000. As was the case last session, expect both camps of tobacco lobbyists to go into hyperdrive when lawmakers come back to work.
While Haridopolos hedges and Scott and other top Republicans remain noncommittal publicly, Sen. Ellyn Bogdanoff, R-Fort Lauderdale, chairwoman of the Senate's Finance and Tax Committee, insists that the Dosal bill constitutes a new tax. And that doesn't sit well with her.
"I don't think it's fair to force someone to be a party to a settlement," the chairwoman of the Senate Finance and Tax Committee told the Miami Herald, adding, "I don't see it passing."
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Contact Kenric Ward at kward@sunshinestatenews.com or at (772) 801-5341.
