Senate OKs tax on some foods to balance budget

The Senate approved a $5.5 billion state budget early Sunday that's balanced by reinstating New Mexico's sales tax on certain foods and increasing the cigarette tax.
The food tax will generate $138 million, but it's expected to run into strong opposition in the House.
The Senate voted 23-19 to impose the gross receipts tax on a wide range of food products, including white flour tortillas, hard taco shells, candy and soft drinks.
New Mexico lifted its tax on food in 2005. The Senate proposal narrows the definition of food. It leaves products tax free if they are considered food under the federal Women, Infants and Children program. Supporters said it will encourage New Mexicans to eat healthier foods and could help reduce obesity.
"It is in effect a tax on salt, on sugar, on white flour and prepared foods," said Sen. Dede Feldman, D-Albuquerque.
The Senate approved tax measures to generate more than $180 million to balance next year's budget for public schools, colleges and government programs, including health care for the needy. The Senate worked past midnight to finish work on the budget, which passed 25-17.
Senate leaders fine-tuned the financial package Saturday to line up enough votes in the fractured chamber to pass the budget package, which relied on politically painful tax increases and spending cuts for education and governmental services.
The Senate approved:
u A House-passed measure generating nearly $16 million by expanding tax withholding requirements on partnerships and certain small corporations. The goal is to improve tax compliance by out-of-state residents. It passed 40-1.
u An increase in the tax on cigarettes by $1 a package to generate $33 million. New Mexico currently imposes a 91-cent tax on a pack of cigarettes. With the proposed increase, only 15 states would levy a higher cigarette tax. The bill passed 24-18 and was sent to the House.
With the revenues from the cigarette tax, the Senate dropped a proposal that would have cut the take-home pay of state workers and educators by requiring them to increase their pension contributions.
Public employee and educational unions opposed the higher pension payments, which would have lowered contributions by governmental employers by $27 million and increased employee contributions by a similar amount.
The Senate-passed budget will lower spending by about 3 percent next year from what public education, courts, colleges and state agencies were provided this year. The upcoming 2011 budget year starts in July.
"We've tried to spread this pain but we can't cover all of our bases," said Sen. John Arthur Smith, a Deming Democrat and chairman of the committee that developed the budget. "This is not a fun job, but we have to have a balanced budget."
With the Legislature scheduled to adjourn Thursday, the House and Senate will have little time to negotiate a a compromise budget and tax package.
A House-passed budget would cut total spending on education and government programs by about 1 percent next year. The House has approved $300 million in tax increases, including an upper-income surtax and a half-cent sales tax increase, to balance its budget proposal.
A special legislative session will be required later this year if the House and Senate fail to agree on a budget — as well as tax increases to balance the spending plan — before adjourning.
"That's the worst case scenario for us," said Smith.

Lorillard to Enter Market for Moist Smokeless Tobacco

Newport cigarette maker Lorillard Inc. announced Monday it will soon enter the market for moist smokeless tobacco products, but said that an earlier joint venture with Swedish Match AB to develop a new product in the U.S. had been mutually terminated.

Moist smokeless tobacco is a type of tobacco product that is popular in the U.S. and widely sold by companies like Altria Group Inc. through brands like Copenhagen and Skoal. Sales of these smokeless tobacco products have risen in the U.S. even as cigarette sales have dropped.

Lorillard didn't provide details of the new moist smokeless tobacco product it will sell in the U.S. but said that an existing joint venture with Swedish Match to develop a new "snus" tobacco product for the U.S. had been terminated. Snus is a nearly 200-year-old Swedish product. In 2006 Lorillard entered into a joint venture with Swedish Match North America to develop and study the possibility of marketing a tobacco product for the U.S. market called Triumph Snus.

Snus differs from most smokeless tobacco products in the U.S. as it is created through a special pasteurization process. It comes in small pouches and doesn't require spitting. On a conference call, Lorillard said the snus product didn't make gains in the test markets in the U.S. and that it may not have been the right time for the product in North America. Lorillard appears to be betting that Americans will continue to lean toward traditional formulations like moist smokeless tobacco, as opposed to newer forms they are less familiar with.

Other companies are still saying they believe snus has a future in the U.S. Altria and Reynolds American Inc. have launched snus products, but sales of these products have generally stayed relatively small. Both these companies, however, say they are expanding the reach of their snus products.

A spokesman for Reynolds American, David Howard, said the company has been very pleased with sales of its Camel Snus product and believes that it is a "viable" product. The company rolled out Camel Snus nationwide in the first quarter of 2009 after putting it in test markets for almost three years. "It's a small market but we believe there is potential growth for that market," Howard said. An Altria spokesman, Brendan McCormick, said the company is pleased with the results of its Marlboro Snus product in test markets and will be expanding it nationally at the end of March.

Swedish Match sells its flagship snus brand General in the U.S. as well as another brand called Catch. These were sold outside of the Lorillard joint venture and will continue to be sold here. Swedish Match will also continue selling the moist smokeless tobacco products, such as its Red Man and Timberwolf brands, it already sells in the U.S.

"We remain committed to the U.S. market," Lars Dahlgren, chief executive of Swedish Match said in an email statement. The company says the dissolution of the Lorillard joint venture has no bearing on its snus joint venture company with Philip Morris International Inc. That venture aims to distribute snus products outside of the U.S. and Scandinavia.

Lorillard's fourth-quarter earnings fell 6.2% on declining volume and increased manufacturing and marketing costs, though sales rose with the help of higher prices.

Lorillard dominates the market for menthol cigarettes. Lorillard's Newport brand represents the bulk of its U.S. sales, and its U.S. volume fell 6.5% during the quarter, though its U.S. market share rose to 10.32% from 9.86%.

Overall, the U.S. cigarette industry has seen volumes drop amid higher taxes and bans on smoking in public places. But Lorillard has held up better since its Newport brand has been able to grow its market share.

Thieves steal hundreds of cigarettes in South Yarra heist

THIEVES have made off with thousands of dollars worth of cigarettes during a brazen heist in South Yarra this morning.
A delivery van driver was travelling along Toorak Rd, near Chamber St, about 7am when two men approached the van and threatened him with a weapon.
The driver, 57 from Mulgrave, was ordered to get out of his white Mercedes van before the thieves drove it to nearby Claremont St.
They then unloaded the cargo of cigarettes into another white van before fleeing.
The delivery driver was uninjured and his van is undergoing forensic testing.
Armed Crime Squad Acting Sen-Sgt Andrew Stamper said police believe the thieves were well prepared.
“This appears to be a well planned robbery because of the time and location," he said.
Police are now hunting three men over the heist.