LANSING – Smokers would pay 75 cents more per pack of cigarettes as the House gave Gov. Jennifer Granholm a critical victory Wednesday by passing the centerpiece proposal of her budget-balancing plan, which would make Michigan’s cigarette tax the second-highest state cigarette tax in the nation at $2 per pack.

Granholm and Democratic legislators, however, were critical of changes that siphoned about $44 million from the revenues the tax was expected to produce.

The revised bill, which would not raise taxes on cigars and other tobacco products, Granholm wants to use the revenue raised by the tax increase to prevent cuts to K-12 public schools and to cover the costs of Medicaid caseloads, which have risen in recent years because of the slow economy. There were some disputes between Granholm and Republicans over how to spend the money, but those were largely patched over and left to be settled later in the budget process.

Supporters of the tax increase have said approval in the House – which is up for election this year unlike the Senate and has a more anti-tax membership than the Senate – is the key step.

Senate Republican leaders expressed willingness to take up the tax, but emphasized it should be done in concert with their proposals to stimulate job development.

The House version of HB 5632 contains some key differences, approved largely along party lines, from Ms. Granholm’s bill, most notably repealing the tax increase in June 2007 and a $30 loss in revenues that will be retained by vendors and wholesalers. It effectively moved back the effective date to July 15 with an amendment that allows vendors to pay their taxes based on the old rate for two weeks after the July 1 effective date.

The House exempted other tobacco products, such as cigars, from the tax increase. It set aside 1 percent of new revenues to for anti-smuggling enforcement. And it expanded a 4 percent increase in Medicaid reimbursement rates that the bill would make to physicians and hospitals to pharmacists, nursing home and ambulatory services too.

The $69 million raised for the remaining months in the 2003-04 fiscal year would largely go to the general fund, which was intended to be the source for closing a $54.1 million deficit in the school aid fund. Without revenues to eliminate the shortfall, Granholm would be forced to cut aid to school districts by $30 per pupil.

Granholm said despite concerns about changes made in the House, the bill contained more plusses than minuses and hopes to work with the Senate to restore provisions she said is needed to provide critical services.

ROLL CALL VOTE: Here is the 55-53 roll call vote on the cigarette tax increase, HB 5632, which includes these changes from last week’s 44-53 defeat:

Democrats who went from no to yes: Sheltrown, Vagnozzi

Democrats who went from abstaining to yes: Accavitti, Cheeks, Daniels, Hardman, Hunter, McConico, Murphy, Reeves, Tobocman

Republicans who went from absent to yes: Hager

Republicans who went from absent to no: LaJoy

Republicans who went from yes to no: Caul

DEMOCRATS VOTING YES (42): Accavitti, Adamini, Anderson, Bieda, Byrum, Cheeks, Clack, Condino, Daniels, Dennis, Farrah, Gieleghem, Gillard, Gleason, Hardman, Hood, Hopgood, Hunter, Jamnick, Kolb, Law, Lipsey, McConico, Meisner, Minore, Murphy, O’Neil, Phillips, Plakas, Reeves, Sak, Sheltrown, Smith, Stallworth, Tobocman , Vagnozzi, Waters, Whitmer, Williams, Wojno, Woodward, Zelenko

DEMOCRATS VOTING NO (4): Brown, Elkins, Rivet, Spade

REPUBLICANS VOTING YES (13): Gaffney, Hager, Hart, Rick Johnson, Julian, Kooiman, Newell, Pumford, Richardville, Shackleton, Shulman, Tabor, Walker

REPUBLICANS VOTING NO (49): Acciavatti, Amos, Bisbee, Bradstreet, Brandenburg, Casperson, Caswell, Caul, DeRoche, DeRossett, Drolet, Ehardt, Emmons, Farhat, Garfield, Hoogendyk, Howell, Huizenga, Hummel, Hune, Ruth Johnson, Koetje, LaJoy, LaSata, Meyer, Middaugh, Milosch, Moolenaar, Mortimer, Nitz, Nofs, Palmer, Palsrok, Pastor, Robertson, Rocca, Shaffer, Sheen, Stahl, Stakoe, Steil, Stewart, Taub, Vander Veen, Van Regenmorter, Voorhees, Ward, Wenke, Woronchak

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