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Officials ponder tax hike

Into the late evening hours Thursday, members of the Alabama Legislature worked out a way to fund the state’s general fund budget. To most, that sounds like a rippling tide of boredom.

However, the late-night work in Montgomery rippled all the way into Demopolis City Hall — and other cities across the state.

Since Gov. Bob Riley took office, he has warned of the enormous revenue shortfall facing the state. When voters rejected his $1.2 billion tax increase proposal, members of the Legislature began the creation of revenue-enhancing bills — like hiking the tax on cigarettes.

The faithful “sin tax,” most popular among politicians for punishing tobacco, alcohol and playing cards, was one of the first ones sighted by state political leaders. But in the context of the bill, legislators decided to limit the amount of tax local governments — like the city of Demopolis — can place on tobacco.

In House Bill 716, which details the contemplated tobacco tax increase, State Rep. John Knight, D-Montgomery sponsored a bill that eliminates the ability of local governments to ever increase tobacco tax again.

“The increases levied by this act shall be exclusive and shall be in lieu of any other or additional local taxes and/or license fees, county or municipal, imposed on the sale or use of cigarettes and/or other tobacco products,” the bill says.

To put it quite simply, if this bill passes, cities can never again increase the tax on cigarettes.

During Thursday’s Demopolis City Council meeting, Mayor Austin Caldwell — as he did late last year in response to the same sort of legislation — suggested council members take a fast look at the amount of city tax levied against tobacco.

In Knight’s legislation, taxes imposed before the passage of HB 716 are allowed.

Currently, the city of Demopolis levies a 4-cent tax on tobacco products. Caldwell asked council members to consider doubling that tax.

“Right now, it’s still being debated, but we need to act on this just in case the bill does pass,” Caldwell said.

While the Mayor called members of the local legislative delegation asking that they oppose the bill, he and members of the council passed a “Just-In-Case” ordinance.

Though it has not been advertised to the public yet, the ordinance will increase the city tax on tobacco from four to eight cents.

At the same time, the implementation of the ordinance is based solely on what happened in Montgomery late Thursday night. After Thursday, the Alabama Legislature meets one more time on May 17.

If Knight’s bill passes, the city’s tobacco tax will increase to eight cents. If Knight’s bill does not pass, taxes on tobacco will remain at four cents.