LANSING – A pack of smokes in Michigan will be taxed by $2 beginning July 1 after Gov. Jennifer Granholm signed a law Thursday afternoon that was approved on Wednesday by the Michigan House and Senate.
The new public act, with immediate effect, is PA 164. One hundred percent of the revenues from the increased portion of the cigarette tax will go to Michigan’s Medicaid Trust Fund for the remainder of the current fiscal year and for the 2004-05 fiscal year.
Beginning with the 2005-06 fiscal year, the revenues will be split 75 percent to the Medicaid fund and 25 percent to the general fund.
It also would raise the tax on other tobacco products, such as cigars and pipe tobacco, from 20 percent to 32 percent on the wholesale price.
Granholm has recommended the tax increase to prop up the Medicaid program, which is straining under rising caseloads. The bill would earmark to Medicaid all new tobacco tax revenues from the increase for the current fiscal year and the 2004-05 fiscal year. Beginning in the 2005-06 fiscal year, 75 percent of the new revenue would go to Medicaid with the other 25 percent going to the general fund.
The tax increase would provide $97 million in new revenue for the current fiscal year and an additional $313 million for the 2004-05 fiscal year that begins October 1.
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