Business owners clashed with health care advocates Thursday over a series of bills that would raise taxes on cigarettes, cigars and e-cigarettes. Lawmakers are proposing tacking on 50 cents to $2 more per pack.

Proponents of the bills insisted that the primary purpose of increasing taxes on tobacco and vapor products was not to raise money, but to save lives by decreasing the number of smokers in Oregon.

Opponents argued that higher taxes would encourage Oregonians to turn to the internet or states with lower tax rates for their smokes. This loss of sales, they said, would force some Oregon businesses that sell tobacco products or e-cigarette supplies to close. As these businesses close, the state would bring in less total money in taxes despite higher rates, they argued.

Compared to other states, Oregon's cigarette tax is low, ranking 30th. (See chart at end of article.)

Oregon levies a tax of $1.32 on each pack of cigarettes. By contrast, New York at No. 1 charges a tax of $4.35 per pack, while neighboring Washington, at No. 7, charges $3.03. (Both states also have a sales tax.)

In the 12 months ending June 30 of last year, Oregon collected $267.2 million in tobacco taxes.

For each pack sold, about 86 cents of tax goes to the Oregon Health Plan and 22 cents goes to the state's general fund. The remainder goes to mental health services, programs to curb tobacco use, local jurisdictions and transportation for seniors.

Four bills heard by the House Revenue Committee on Thursday would raise cigarette taxes. The proposed increases range from 50 cents per pack (HB 2056) to $2 a pack (HB 2119). House Bill 2662, sponsored by Democrat Sen. Elizabeth Steiner Hayward and Reps. Alissa Keny-Guyer and Carla Piluso, would increase cigarette taxes by $1.60 a pack and remove Oregon's current 50-cent-per-cigar tax cap.

Steiner Hayward, a doctor who is also pushing to raise the legal smoking age to 21, said she would support as high a tax increase as possible.

Tobacco use costs each Oregon household an average of $1,600 per year for health insurance, Medicaid, lost worker productivity and lower graduation rates, she said, citing a report from the Oregon Health Authority.

"Anything that increases the price of these dangerous, addictive substances will decrease their utilization while still maintaining revenue," she said.

A 2011 study by the International Agency for Research on Cancer found that increased taxes reduced overall tobacco consumption by keeping young people from starting to smoke, helping people quit, and lowering consumption among continuing smokers.

In Oregon, where lawmakers have steadily increased tobacco taxes over the last few decades, sales of cigarette pack sales per capita have fallen 50 percent since 1997, the Oregon Health Authority reports.

Tobacco use remains the leading preventable cause of death and disease in Oregon and the U.S., according to the Centers for Disease Control and Prevention and the Oregon Health Authority.

But some at Thursday's hearing said higher taxes won't solve anything. Justen Rainey, a lobbyist for cigarette giant Reynolds American, said smokers will simply look for cheaper alternatives, whether that's online, across state lines or through a black market.

What's more, he said, the tax is regressive, because more than half of smokers make under $25,000 a year.

"This is really the poorest of the poor you'd be looking to balance the budget on," he said.

Chris Gerard, chief executive of the Beaverton-based Plaid Pantry chain, echoed Rainey's worries that higher taxes would create a black market for cigarettes. Tobacco products make up a third of the chain's overall sales, he said.

Many people who come in to buy a pack of cigarettes also buy food, Gerard said. So if those people aren't coming into the stores anymore, he'll lose more than cigarette sales, he said.

Most proponents of the bills said they would like to see the cigarette tax raised to at least $2.

James Barta, a lobbyist for Children First for Oregon, acknowledged that the cigarette tax is regressive, but said it's worth it if it encourages fewer people to smoke.

"It's time to break the addiction, and it's time to start with this next generation of children," he said.

FILE - In this April 23, 2014 file photo, E-cigarettes appear on display at Vape store in Chicago.

Small business owners attended Thursday's hearing in force. Those in the e-cigarette industry said HB 2062, which would tax the sale of liquid for vaping devices at 95 percent, would kill their businesses.

Ally Stubbert, who owns a liquid manufacturing facility in Milwaukie, said the proposal felt like a slap on the face.

The sky-high rate would put the whole e-cigarette industry out of business in Oregon, and push it online, she said.

The vaping industry isn't completely against a sin tax, though: A 10 percent tax would be manageable, she said.

Meanwhile, cigar shop owners took issue with HB 2662. The removal of a cap on cigar taxes would render them unable to compete with online retailers, they said.

Brenton Agena, general manager of Portland-based Broadway Cigar Co., said his shops have a hard time competing with the existing 50-cent tax limit on individual cigars. If that cap were removed, he would have to close his stores, he said.

"The ideal of a smoke-free Oregon will never happen," he told the revenue committee, explaining that if Oregon cigar shops were forced out of business, he would simply order them online. "I was raised on the pride of our country's ability to choose what we would like to do."

Near the end of the meeting, Rep. Knute Buehler, R-Bend, asked Oregon Health Authority chronic disease prevention manager Karen Girard if she would rather people smoke cigarettes, cigars or e-cigarettes.

Though Girard said she would prefer no one used any of the products, she identified cigarettes as the most dangerous, with moist snuff and roll-your-own cigarettes coming up second.

She couldn't speak to the health impacts of smoking cigars or vaping, she said.

-- Anna Marum

amarum@oregonian.com

503-294-5911

@annamarum

Save