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Obama Tobacco-Tax for Pre-Kindergarten Draws Opposition

Even before President Barack Obama officially proposed a federal cigarette tax increase to fund preschool programs, tobacco companies and sellers lined up against it while anti-smoking groups praised the plan.

Obama’s 2014 budget proposal, to be released April 10, would finance a pre-kindergarten program for 4-year-olds with higher taxes on cigarettes and other tobacco products. The president outlined the program in his annual State of the Union speech to Congress. He’s seeking to increase spending in areas such as education while Republican lawmakers are pushing for additional budget cuts as a way to reduce the federal deficit.

White House spokesman Jay Carney declined to elaborate on the proposed tobacco-tax increase. “Wait for specifics,” he told reporters at a briefing yesterday.

The tobacco industry didn’t wait.

“The idea of increasing taxes on low- to middle-income Americans at this time is ludicrous,” said Bryan Hatchell, a spokesman for Winston-Salem, North Carolina-based Reynolds American Inc. (RAI) “As middle-income Americans struggle to make ends meet in a very slow economic recovery period, this is not the time to hit them with higher taxes.”

“It is unfair to single out adult tobacco consumers with another federal tobacco-tax increase to pay for a broad, new government-spending program,” said David Sutton, a spokesman for Richmond, Virginia-based tobacco-maker Altria Group Inc. (MO)

Convenience Stores

Convenience stores would be hurt as higher taxes curb consumer spending, including on tobacco purchases that account for 40 percent of their non-gasoline sales, said Jeff Lenard, a spokesman for NACS, formerly the National Association of Convenience Stores.

“It is not just the loss of sales, but also the loss of customers,” said Lenard, whose Alexandria, Virginia-based group represents such companies as Sheetz Inc., 7-Eleven Inc. and Valero Energy Corp. (VLO)

Robert Bannon, director of investor relations for Greensboro, North Carolina-based Lorillard Inc., (LO) declined to comment.

Tobacco-industry workers and their families contributed $4 million to 2012 election campaigns, with almost 80 percent of that going to Republicans, according to the Center for Responsive Politics, a research group in Washington that tracks political finance. The industry spent $26.7 million last year to lobby Congress and the executive branch, center figures show.

‘Political Win’

Anti-smoking organizations praised Obama’s proposal.

“A significant tobacco-tax increase is a win-win-win for the country -- a health win that will reduce tobacco use and save lives, a financial win that will raise revenue to fund an important initiative and reduce tobacco-related health-care costs, and a political win that is popular with voters,” said Matthew Myers, president of the Campaign for Tobacco-Free Kids in Washington.

The federal government currently taxes cigarettes at about $1 a pack. The levy was increased by 61 cents in 2009.

“Raising the price of tobacco products is one of the most effective approaches to encouraging people to quit and preventing kids from picking up the deadly habit in the first place,” said John Seffrin, chief executive officer of the American Cancer Society, based in Atlanta.

To contact the reporters on this story: Chris Burritt in Greensboro, North Carolina, at cburritt@bloomberg.net; Jonathan D. Salant in Washington at jsalant@bloomberg.net.

To contact the editors responsible for this story: Kevin Orland at korland@bloomberg.net. Jeanne Cummings at jcummings21@bloomberg.net.

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