New York Governor Andrew Cuomo Proposes New Vape Tax in Budget Request
In his $152.3 billion state budget proposal, Governor Andrew Cuomo (D-N.Y.) proposed a 10-cent per mL tax on the liquid contained in electronic cigarettes and vapor products. The tax would be imposed on the wholesale level and would apply both to e-liquid that contains nicotine and e-liquid that does not. According to state revenue estimates, the tax would generate $3 million annually.
This reckless tax hike proposal flies in the face of conclusive evidence that vapor products are effective smoking cessation tools that represent no greater than 5 percent of the harms to consumers as traditional combustible tobacco cigarettes. Balancing the state budget on the backs of smokers looking to quit flies in the face of decades of efforts aimed at curbing cigarette use to drive down public health costs.
Currently, six states impose an excise tax on vapor products including North Carolina (5 cents per mL), Louisiana (5 cents per mL), Kansas (20 cents per mL), West Virginia (7.5 cents per mL), Pennsylvania (40% wholesale), and Minnesota (95% wholesale). Beginning April 1, California will also impose a 27.3% wholesale tax on vapor products.
Earlier this month I outlined the possible relationship between state overspending problems like New York's and possible tax threats to vapor products in the states. That map can be found below and the original piece can be read here. Click the map to enlarge.
Though only a small portion of Cuomo’s large tax hike plans (including an extension of the nearly 9% “temporary” tax surcharge on income over $1 million), the tax on vapor products is among the most punitive. It not only targets smokers, who are some of the most heavily taxed consumers in the United States, but it targets former smokers who have found vapor products as a successful means of quitting smoking. Similar to other nicotine replacement therapies (NRTs), vapor products should remain taxed at the sales tax rate exclusively.
The state’s declining revenue collections from cigarettes may play a role in the increased interest from the governor in taxing vapers. During the current fiscal year, tobacco products generated about $1.3 billion for the state, a figure projected to decrease to roughly $1.2 billion this year and even further in future years. At $4.35 per pack, New York’s state cigarette tax is the highest in that nation. Residents of the Big Apple are hit with another local tax that brings smokes bought there to a per pack tax rate of $5.85.
This high cigarette tax rate has led to the highest rate of cigarette smuggling in the nation. According to an analysis conducted by the nonpartisan Tax Foundation and Mackinac Center for Public Policy, 55.4 percent of cigarettes consumed in the state are smuggled in, which helps consumers avoid paying taxes on the products.
Unlike cigarettes, consumers can purchase vapor products online where taxes are not collected or imposed by the government. This will result in the closing of vape shops across the Empire State, a loss in sales, income, and excise tax revenue, and will harm those seeking a brick and mortar experience in their quit journey.
The legislature should reject this senseless cash grab and focus on spending restraint instead.
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Isn't it wonderful to give away other people's money? First you come up with all kinds of freebies. Then you decide who should foot the cost! You won't pay for the freebies from savings or sacrificing other services which may not be as needed. Nope, you find some suckers to pay for it by taxing them more! Wow, that's really clever. And the population of Florida just keeps on growing, and New York's shrinking. I guess people aren't as dumb as we think they are.
New York State collects over one billion dollars a year in cigarette taxes. He's now proposing a tax that will collect '3 million dollars' per year. Do you really think he'll leave it at that? Hah!
Thank God I moved out of New York years ago.
New York (like California and other states) are hurting for revenue now more than ever, partly due to the tobacco bonds they've issued in recent years. These tobacco bonds leverage future tobacco tax and MSA payments, which are proportional to the sales of actual tobacco cigarettes in the state. Now that smokers are switching from smoking to vaping, these states are having to pull funds from other revenue pools to pay the dividends on the bond issues, and they're scrambling to find another revenue source (vaping).
These states gambled that smokers would continue to smoke at current or higher rates, and the tobacco economy would continue on the projected course. They were wrong.
State Overspending May Be A Significant Problem for Vapers in 2017
As the 2017 legislative session kicks off in states across the country, three-fifths of states face overspending problems that will force serious discussions about currently collected tax revenue and future spending levels. More commonly but incorrectly referred to as budget shortfalls, states across the country face a conflict between anticipated revenue levels and out of control budget growth. It should come as no surprise to consumers of vapor products that this presents the threat of new product taxation in states where sin taxes have not yet been imposed.
Electronic cigarettes and vapor products are used by millions of consumers in the United States as a means to quit smoking combustible, or traditional cigarettes. The mounting evidence suggests that these smoking cessation products are at least 95 percent less harmful than cigarettes. That, however, hasn’t deterred lawmakers from targeting the growing multi-billion dollar industry and its consumers with tax hikes.
By sheer number of threats in recent years, vapor products have been the number one targets for tax hikes of any product or type of tax imposed by states, including cigarettes. And while lawmakers have succeeded at raising or phasing in more increases in state cigarette taxes (15 times since 2013), the imposition of entirely new sin taxes on vapor products in 6 states (plus once by voters) is a trend we at ATR will continue to monitor.
In each of the seven states that will impose an excise tax on vapor products in 2017, six came about as part of a tax package between 2012 and 2016 that also increased the state cigarette tax rate. The trend of considering tax increases on both products at the same time mirrors a national problem the vapor industry and its consumers face; the incorrect perception that the products are similar because vaping looks like smoking and thus a natural extension of a cigarette tax hike is an e-cigarette tax hike as well.
Until the emergence of vapor products, cigarettes were the number one targets of tax hikes in the states. Between 2000 and 2016, 48 states and the District of Columbia passed 135 state cigarette tax increases, five times the number of tax hikes passed on liquor.
Below is a summary of legislative tax changes imposed last year alone. As you can see, state tobacco tax hikes represent the second largest type of tax hike from FY17.
Cigarettes are a popular scapegoat for overspending and shortfalls because the taxes can bring in somewhat significant revenue quickly without much opposition from consumers, even if it the money may be short-lived, cause budget volatility, lead to black markets, and punitively punish the poor. Regardless, cigarettes remain a top target for tax-hungry politicians.
In an era (post-2010 GOP gains across the country) of opposition to broad-based tax increases (a win for most taxpayers), sin taxes are an easy target for politicians in tough economic times who wish to raise as much money as possible from as few voters opposed. Though misguided, it’s the reality. As such, with more than half of U.S. states facing overspending problems (shortfalls), 2017 may be a tough year for lawmakers, “sinful” product consumers, and small businesses across numerous industries.
To preview the states where new vapor product taxes may be a real risk, I’ve compared the states with budget shortfalls (MultiState rundown here) to those that have passed a cigarette tax increase in recent years. In most cases, states that have passed a cigarette tax in the last four years are unlikely to do so again this year and new standalone vapor taxes will be rare, though possible.
Overspending problems aren’t the only things that cause tax hikes; some politicians are simply addicted to your money. As such, I’ve also included a number of states where budget discussions and the political climate lend itself to a real threat that a vapor product tax may be sent to the governor’s desk regardless of a stable budget outlook.
States with a defined overspending problem in 2017 where cigarette taxes have not been raised in the last four years (2012-2016), and the projected budget gap:
- Alaska: $4 billion;
- Colorado: $119 million;
- Delaware: $350 million;
- Illinois: greater than $10 billion;
- Indiana: $378 million;
- Iowa: $132 million;
- Maryland: greater than $175 million;
- Missouri: greater than $200 million;
- Nebraska: nearly $1 billion;
- New Mexico: $69 million;
- New York: $689 million;
- North Dakota: $310 million;
- Oklahoma: $868 million;
- Virginia: $861 million;
- Washington: $474 million;
- Wisconsin: $693 million;
- Wyoming: $156 million.
States with an undefined but possible shortfall and no recent cigarette tax hike:
- Montana – governor has already called for a tobacco tax hike;
- South Dakota;
- Texas: lackluster forecast.
States with a budget shortfall, cigarette tax hike in last four years, and possible vapor tax:
- Alabama: greater than $40 million;
- Connecticut: greater than $1.3 billion;
- Massachusetts: nearly $300 million;
- Oregon: $1.7 billion;
- Rhode Island: $112 million;
- Vermont: greater than $40 million.
States without a budget shortfall but possible vapor tax:
- Ohio – vapor tax proposed by current governor in prior years;
- Hawaii – the state with more tobacco bills annually than anywhere else.
States without a shortfall or reason to believe there will be a successful effort to impose a vapor tax in 2017 include Arizona, Arkansas, Florida, Georgia, Idaho, Kentucky, Maine, Michigan, Nevada, New Hampshire, New Jersey, South Carolina, Tennessee, Utah.
Summary, in case you skipped to the bottom: A lot of states have overspent tax dollars in recent years, quickly forgetting (or neglecting) the impact of slow recession-era growth on budgets and state governments. Unfortunately for consumers, targeted excise taxes on products like cigarettes and a misconception that vaping is smoking by another name has put consumers of life-saving products like electronic cigarettes in the crosshairs of the ever-present threat of tax increases at the state level.
Americans for Tax Reform opposes all tax increases as a matter of principle and will continue to monitor and fight efforts to subject life-saving products like vapor products to new and higher taxes.
Publisher's note: The assessments made in this post are based predominantly on the fiscal conditions of states in 2017. It is quite possible that additional states, like Utah and Nevada, will consider proposals to tax vapor products despite a nonexistent need to balance the state budget beyond projected tax collections and spending rates. It is also possible that states labeled possible threats will not consider excise taxes on vapor products as smarter alternatives such as spending restraint is considered instead. This map and post simply serves as a suggestion that where tax hikes are considered, history can be a strong but not guaranteed indicator of future outcomes.
If you’re interested in more information on 2017 state budget conditions, read the National Association of State Budget Officers most recent “Fiscal Survey of States.”
TAXES, TAXES TAXES.....cut welfare reform, food stamps division to able bodied workers from 21-50 years old and cut the national debt.....stop your budget wastes and government over-reach to cut costs...can't ANY of you learn from your past mistakes and failures? Put people to work doing something....picking up liter off the highways, helping out in community activities, clean up their own neighborhoods, paint houses, DO SOME WORK....stop the HANDOUTS TO MANY WHO CAN DO SOMETHING....and stop taxing, taxing, taxing the working middle class!!! WE ARE SICK OF IT!!!
ATR Launches Campaign to Defeat Vapor Products Tax Hike in Pennsylvania
On the heels of a July 1 deadline for the FY 2016-2016 budget, legislative leaders and Governor Tom Wolf (D-Pa.) are in the final stretch on deciding the size of the annual budget and whether tax hikes will be an element of the deal. Unlike last year, broad based tax increases including the sales and income tax seem to be off the table. Unfortunately, the target of money-hungry lawmakers seems to be smokers, vapers, and gamblers.
In response to these targets for tax hikes, ATR has again launched a campaign to defeat any and all efforts to raise taxes, with a specific focus on the proposal to impose a massive and new 40% wholesale tax on tobacco-free vapor products.
The first set of lawmakers’ constituents who will receive phone calls urging them contact their lawmaker to tell them to reject taxes hikes on products that are helping smokers quit includes:
- House Speaker Mike Turzai (HD-28)
- House Majority Leader Dave Reed (HD62)
- Senate Majority Leader Jake Corman (SD34)
A sample script can be read here:
Hi, this is Linda Adams with an important message about a pending tax increase in Pennsylvania. This call was paid for by Americans for Tax Reform at 202-785-0266. Republicans are on the verge of passing a massive new tax hike on small businesses that are helping smokers quit. This will hurt public health and kill jobs. Press 1 on your phone now to connect to your state Senator Jake Corman to tell him to reject tax hikes. Press 1 now.
The increasing body of scientific evidence suggests that vapor products are between 95 and 99 percent less harmful than combustible cigarettes and are being used by smokers as smoking cessation products. To target with tax hikes a product that helps smokers quit works at cross purposes with decades of efforts to curb the use of cigarettes and makes for horrible tax and public health policy.
ATR will be closely monitoring this debate and urges lawmakers to rein in out-of-control spending instead of soaking consumers and businesses with unaffordable tax hikes. Additional legislative districts may be added to this campaign in the coming days.
West Virginia Legislature Passes Massive New Tax on Vapor Products
In a Special Budget Session, the West Virginia House of Delegates and state Senate voted to subject electronic cigarettes and vapor products to a new, onerous excise tax. By a vote of 63-45, the House voted to adopt a Senate proposal that is expected to yield $98 million in new revenue for the state over the next year.
Senate Bill 1012, which passed in the Senate over the weekend and the House today, included both a $.65 per pack cigarette tax hike and a new 7.5 cents per mL e-liquid tax. The latter element of the packages makes West Virginia only the 5th state in the nation to subject vapor products to a sin tax.
Americans for Tax Reform expressed its opposition to these tax hikes in a letter to the legislature, which can be read here.
We summarized the dangers in increasing the reliance on tobacco taxes by explaining,
“Targeted excise taxes have proven to be unstable sources of revenue, and ultimately can cause a reduction in tax receipts…In fact, only three out of the 32 state tobacco tax increases, enacted between 2009 and 2013, have met or exceeded tax revenue projects.”
This is largely due to black market smuggling, cross-border sales, and the seeking out of lower cost products in cheaper markets. All of these acts result in greater burdens on low-income consumers and to the detriment of in-state small businesses like convenience stores.
The greater affront to public health, however, came in the form of the new tax on electronic cigarettes and vapor products, which will now be taxed at a rate of 7.5 cents per mL of e-liquid.
“These tobacco-free technology products are helping tens of thousands of smokers make the transition to far healthier alternatives. By imposing a 7.5-cent per mL tax on e-cigarettes…this punitive tax is both anti-health and a shameless cash grab…It is reckless to destroy with tax hikes small businesses accomplishing what tax hikes on cigarettes never could, getting people to quit smoking.”
Vapor products are between 95 and 99 percent less harmful than combustible cigarettes and tax hikes clearly work against efforts to reduce the harm associated with smoking.
The House of Delegates rejected an amendment by Delegate Larry Faircloth that would have removed e-cigarettes and vapor products from Senate Bill 1012’s tax hikes. This new tax makes West Virginia the state with the 3rd highest tax rate on the products in the nation.
It should also be noted that with passage of this bill, "No wholesaler or other person may purchase e-cigarette liquids from any seller not approved by the Tax Commission," setting up a requirement for any company who sells products into WV to first be approved by the state to do so, beginning on July 1st.
Instead of reining in spending, the legislature has imposed a senseless cash grab on consumers of smoking cessation products while increasing the state’s dependence on a volatile revenue source. As the legislature prepares for next year's budget debate, it should consider repealing these tax hikes as part of a broader effort on tax reform.
ATR Urges West Virginia Lawmakers to Rein in Spending During Special Budget Session
As the West Virginia legislature enters the second week of deliberations during the 2016 Special Session, Americans for Tax Reform is urging lawmakers to focus on spending restraint instead of tax increases to address the state's $270 million shortfall. Unfortunately, Gov. Earl Ray Tomblin (D-W.Va.) has limited the options of the legislature in his narrow call for session, and has proposed tax hikes as the ultimate solution to the state's overspending problem.
Among the most significant elements of the tax increases being considered is a tobacco tax hike, which would disproportionately harm low-income consumers and border communities. SB 1005 would increase the cigarette tax by 45 cents per pack, raise the wholesale tax on other tobacco products to 12 percent, and impose a new 7.5 cents per mL tax on the liquid contained in tobacco-free electronic cigarettes and vapor products.
ATR outlined our opposition to these proposals in a February letter to the legislature, which can be read here.
In urging the legislature to focus on spending restraint instead of tax hikes during the Special Budget Session, ATR president Grover Norquist and Americans for Prosperity - WV state director Jason Huffman (AFP) have jointly authored a letter explaining:
"Imposing tax hikes on residents will do little to make West Virginia more attractive to investment or stop residents from continually fleeing to other states."
They explain further:
"West Virginia does not have a revenue problem; the state government has an overspending problem. At $12,910, per-capita government spending in West Virginia was the third highest in the nation in 2014. It should be noted that the two states with higher per-capita spending – Alaska and Wyoming – don’t impose income taxes and currently have among the lowest tax burdens among any states."
There are still significant elements of the budget that contain waste, cost overruns, and abuse that the legislature should work to eliminate.
"An estimated $100 million a year is wasted by bureaucrats on Medicaid because of improperly awarded managed care contracts obtained without competitive bidding.
Similar waste exists at the Division of Highways, where Deloitte identified 15 instances of waste that cost taxpayers $25-50 million a year in cost overruns because of the inefficient use of resources."
ATR will closely monitor deliberations and continue to urge lawmakers to focus on spending restraint, budget transparency, and government reform instead of tax hikes in the coming days and weeks.
Indiana Attorney General Greg Zoeller Refuses to Rule out Tax Hikes in Bid for Congress
Greg Zoeller is the only Republican candidate for Indiana’s 9th Congressional district to refuse to sign the Taxpayer Protection Pledge promising to oppose higher taxes. His unwillingness to rule out tax hikes is somewhat unsurprising, given his call for higher taxes in Indiana as recently as last year. Zoeller asked the state legislature to impose a new 24 percent wholesale tax on tobacco-free electronic cigarettes and vapor products in the lead-up to the legislative session.
His ignorance and outright hostility to this emerging product category flies in the face of growing evidence that vapor products are at least 95% less harmful than combustible cigarettes and are proven-effective smoking cessation devices. It also stands to make him among the only Republican member of Congress with such misguided and outspoken opposition to the products.
The Taxpayer Protection Pledge has been offered to every candidate for federal office since 1986. In the 114th Congress, 218 Congressmen and 48 Senators have signed the Pledge, including Rep. Todd Young (IN-09).
Each of the remaining candidates has signed the Taxpayer Protection Pledge, promising to voters that they would oppose tax hikes. Those candidates include Trey Hollingsworth, Brent Waltz, Erin Houchin, and Robert Hall.
This primary election also comes on the heels of new state regulations that stand to decimate the state vapor market. One could argue that Zoeller’s outspoken position on the products jump-started the effort to overregulate the products in Indiana last year.
“The voters in Indiana have a right to know where a candidate stands on the issues before electing them to Congress. Zoeller’s refusal to sign the Taxpayer Protection Pledge puts him outside the mainstream of the Republican Party. Eighty-nine percent of all congressional Republicans have signed the Taxpayer Protection Pledge. He would be one of a small group of Republicans open to raising taxes,” said Grover Norquist, president of Americans for Tax Reform. “The only reason Zoeller wouldn't sign the Pledge is if he intends to raise taxes.”
“The promises that Zoeller makes about strengthening Indiana’s economy mean little without the backing of a concrete written promise to oppose higher taxes. Only by signing the Pledge can Indiana taxpayers be certain that Zoeller stands with them.”
Voters should keep this in mind as they head to the polls in Indiana next Tuesday, May 3rd.
ATR Supports Predicate Date Change in the Tobacco Control Act
The U.S. House Committee on Appropriations will begin markup on the 2017 Agriculture Bill tomorrow, representing a significant opportunity to halt the Food and Drug Administration’s (FDA) overregulation of vapor products in the United States. An amendment to the bill, proposed by Rep. Tom Cole (R-Okla.) will change what is known as the “predicate date” for tobacco products that have hit the market since February of 2007.
This is significant for a number of reasons. First, the Tobacco Control Act (TCA) established an arbitrary date of February 15, 2007 of which all tobacco or tobacco-derived products must establish existence in the market in order to avoid an expensive, if not impossible regulatory pre-approval process within the FDA. This was essentially intended to prevent new tobacco products like cigarettes from hitting the market without pre-approval, which would likely not ever occur.
Unfortunately, innovation has encountered an outdated regulatory code and trapped life-saving smoking cessation products in the mix.
Tobacco-free electronic cigarettes and vapor products did not exist in any commercialized form in 2007, signaling that it was not the intent of the Tobacco Control Act to regulate these products in a similar manner. Unfortunately, because the nicotine contained in many vapor products comes from tobacco plants, the FDA has asserted regulatory authority under the TCA covers these products as well.
As such, an effort underway by Rep. Cole would change the arbitrary 2007 date to the date at which the FDA announces its “deeming regulation,” where they deem vapor products as tobacco products, for regulatory purposes. This common sense change to the Tobacco Control Act would ensure that products already being sold to millions of consumers in the United States would remain available and affordable for adults. Absent a change in this date, the most significant advancement in public health in decades will be stifled by government.
The growing body of scientific evidence suggests that vapor products are at least 95% and as much as 99% less harmful than combustible cigarettes. Both Matt Meyers of the Campaign for Tobacco Free Kids and Mitch Zeller of the FDA’s Center for Tobacco Products have made statements suggesting their understanding of the opportunity for risk mitigation as well.
Matt Meyers, in 2014 testimony to the Senate Commerce Committee: “Responsibly marketed and properly regulated, e-cigarettes could benefit public health if they help significantly reduce the number of people who smoke conventional cigarettes and become sick and die as a result.” He explained further that if properly regulated, “I don’t think there is any doubt that there would be a reduction in harm,” from smokers who switched to e- cigarettes.
Mitch Zeller: “If we could get all of those people [who smoke] to completely switch all of their cigarettes to noncombustible cigarettes, it would be good for public health.”
Absent a Congressional change in the predicate date, only large tobacco companies will be able to afford the compliance costs associated with obtaining pre-market approval within the FDA to sell electronic cigarettes. The millions of dollars necessary to undergo this expensive regulatory process will halt innovation, and put most small businesses out of business, striking a significant blow to public health.
A change in the predicate date will do nothing to prevent the FDA from regulating the product category with reasonable requirements like ingredient disclosure or the establishment of good manufacturing practices. It will simply permit innovation to exist to the benefit of most consumers and small businesses in the industry.
It’s Time for Presidential Candidates to Weigh In on the Overregulation of Vapor Products
When the Office of Information and Regulatory Affairs (OIRA) designates that a federal regulation or rule is significant, or having an effect on the economy of more than $100 million, the agency must send a report to the Government Accountability Office (GAO) and both houses of Congress. This requirement was signed into law in 1996 in the form of the Congressional Review Act (CRA), and it allows legislators to introduce a resolution of disapproval to rescind a regulation. If successfully passed, the rule “may not be reissued in substantially the same form.”
Though the requirement to inform the GAO or Congress is often ignored, the requirement and important oversight authority of CRA do provide a legislative tool for Congress if it becomes necessary to provide a check on burdensome federal regulations.
The American Action Forum predicts that given the current House and Senate calendars, President Obama will have until May 17, 2016 to issue significant regulations without fear the next Congress and succeeding administration will use the CRA to repeal the regulations.
One such significant regulation is the Food and Drug Administration’s (FDA) proposed “deeming regulation” for electronic cigarettes and vapor products in the U.S. Without Congressional intervention, the FDA is poised to deem that these tobacco-free technology products be regulated like tobacco products under the Family Smoking and Prevention Tobacco Control Act. Predictions on the impact of this regulation range significantly, with some estimates suggesting that the cost of compliance would range from $2 to $10 million per product currently being sold to consumers. The total impact on the economy would far exceed the $100 million threshold for notice and Congressional oversight. This includes closed businesses, job losses, compliance costs, and a significantly negative public health impact in the short and long term.
The first and easiest way to address the yet-to-be-announced deeming regulation for vapor products would be to amend what is known as the “predicate date” for the introduction of what the FDA labels as tobacco products, including e-cigarettes. A House Resolution (HR 2058) sponsored by Oklahoma Congressman Tom Cole does just that, and has 51 Republican co-sponsors in the House. ATR supports this effort.
But given the inaction over this issue, it’s time for the next President to weigh in. Without Congressional action and assuming the FDA does finalize its deeming rule for vapor products, the next president will play an important role in potentially utilizing the CRA in conjunction with Congress to prevent the FDA from destroying thousands of small businesses and harming public health.
E-cigarettes are at least 95 and as much as 99 percent less harmful than combustible cigarettes. This is no small issue and deserves the attention of those seeking America’s highest office.
In testimony to the Senate Commerce Committee, Matthew Myers of the Campaign for Tobacco-Free Kids explained,
“Responsibly marketed and properly regulated, e-cigarettes could benefit public health if they help significantly reduce the number of people who smoke conventional cigarettes and become sick and die as a result.”
Where do Donald Trump, Gov.John Kasich (R-Ohio), Sen. Ted Cruz (R-Texas), Hillary Clinton and Sen. Bernie Sanders (D-Vt.) stand on the FDA’s attempt to kill the vapor product industry? To date, none of these candidates have weighed in.
Given the fact that the Centers for Disease Control (CDC) estimates that there were at least 9 million consumers of these products in 2014, silence on these issues may not be a sustaining political tactic.
ATR Opposes Using Tax Hikes to Fix West Virginia's Overspending Problem
With less than two weeks remaining in West Virginia's 2016 Regular Legislative Session, budget work continues as part of an effort to address a $400 million overspending problem in this fiscal year. The new Republican majority has made great strides in protecting taxpayers and workers in the Mountain State this year, passing a repeal of the state prevailing wage law and making West Virginia the 26th Right-to-Work state.
In the final days of session, however, taxpayers remain at risk. In his 2016 budget, Gov. Tomblin (D-W.Va.) proposed a number of tax increases on tobacco and tobacco-free smoking cessation products, including a 45-cent-per pack cigarette tax. The state Senate amended and passed that plan, in the form of Senate Bill 420, increasing the state cigarette tax by $1-per pack, which would make the state rate $1.55-per pack. This is a misguided approach to fixing an overspending problem and will only create more volatility in the budget in the long term.
As Grover explains in his letter to the legislature:
"Targeted excise taxes have proven to be unstable sources of revenue, and ultimately can cause a reduction in tax receipts. Increasing the state¹s reliance on tobacco taxes by increasing them by $1 per pack will not necessarily generate more revenue in the long term. When Illinois nearly doubled its cigarette tax in 2012 by raising the tax $1-per-pack; it generated $138 million less than projected. A reduction in tax receipts is a common occurrence amongst cities and states that attempt to discourage consumption with higher costs. In fact, only three out of the 32 state tobacco tax increases, enacted between 2009 and 2013, have met or exceeded tax revenue projects."
Those in the public health community have a good reason to be concerned with SB 420 as well.
"Anti-smoking activists and public health advocates should be concerned about the next target of tax hikes contained in SB 420: electronic cigarettes and vapor products. These tobacco-free technology products are helping tens of thousands of smokers make the transition to far healthier alternatives. By imposing a 7.5-cent per mL tax on e-cigarettes and retroactively requiring taxes to be paid on store inventory, this punitive tax is both anti-health and a shameless cash grab.
One vape shop owner in Monongalia and Harrison counties has already stated that this would cost him between $30,000-$50,000 up front. It is reckless to destroy with tax hikes small businesses accomplishing what tax hikes on cigarettes never could, getting people to quit smoking.
Taking aim at e-cigarettes with higher taxes works against efforts to reduce the harm associated with smoking. A number of studies have shown that electronic cigarettes can improve health and prevent disease. By choosing to "vape" e-cigarettes, consumers get their nicotine fix without the combustion and smoke, which are responsible for many of the negative health effects of tobacco cigarettes. A Public Health England study found that e-cigarettes are 95-99% less harmful than tobacco cigarettes. The legislature should reject raising taxes on healthier, life-saving products."
Another piece of legislation that recently passed the House Finance Committee by a voice vote, risks being used as a Trojan Horse for a tax increase. House Bill 2704 would broaden the list of products and services subjected to the state sales tax and lower the rate from 6 percent to 5.5 percent at the end of 2016.
As Grover explains in his letter to the House of Delegates:
"HB 2704 represents a step in the right direction because it broadens the base of products and services subjected to the sales tax while lowering the rate overall. Principally, this is what conservative tax reform looks like. Caution must be taken, however, to ensure that HB 2704 is revenue neutral, if static scoring is applied, where economic growth is not considered. If dynamic scoring is applied, it is likely that this legislation would generate more revenue for the state in the long term and that would not constitute a tax increase because it is accomplished through growth.
If the broader sales tax rate is not reduced to a rate that makes this a revenue neutral bill, voting for it will constitute a violation of the Taxpayer Protection Pledge, the written commitment many lawmakers have made to their constituents to oppose tax increases."
UPDATED: Map of Pending Tax Threats to Vapor Products in the States
On the day of an overwhelmingly bipartisan Senate confirmation of President Obama's pick for Food and Drug Administration (FDA) commissioner and on the heels of a House budget hearing for the FDA, it's important to examine the fights taking place against government overreach at the state level as well. The most significant of which includes the ongoing attempt by the so-called public health community and money-hungry lawmakers to raise taxes on electronic cigarettes and vapor products.
*As of today, 11 states are still considering imposing excise or "sin" taxes on e-cigarettes, a policy prescription that Americans for Tax Reform fundamentally opposes in every state with ongoing threats. E-cigarettes are not only tobacco-free technology products; they are actually effective smoking cessation tools and helping thousands of Americans quit smoking. Politicians should not only reject efforts to raise taxes on e-cigarettes; they should publicly embrace and celebrate the growth of the industry.
*Updated on March 22.