FISCAL NOTE



FUND(S):

General Revenue Fund, Governor's Office of Health Enhancement and Lifestyle Planning Fund

Sources of Revenue:

General Fund,Special Fund

Legislation creates:

A New Fund



Fiscal Note Summary


Effect this measure will have on costs and revenues of state government.


The stated purpose of this bill is to raise the cigarette tax to the national average, to raise the tax on other tobacco products to fourteen percent of their wholesale price and to establish a special revenue account to fund the Governor’s Office of Health System Improvement. This bill was recommended for passage during the 2009 Regular Session by Select Committee D on Health. As written, this bill proposes to raise the excise tax on cigarettes from the current rate of 55 cents per pack to $1.20 per pack, resulting in a gain of roughly $102.3 million per year. Also, the bill raises the tax rate on all other tobacco products from 7% of the wholesale price to 14% of the wholesale price. This increase may yield about $5 million per year. These estimates include consumption declines in response to price increases associated with changes in tax rates. This bill provides that one-half of all Tobacco Products Excise Tax collections be deposited in a special account in the State Treasury (i.e., the Governor’s Office of Health Enhancement and Lifestyle Planning Fund). This new fund would accrue roughly $110.4 million per year beginning in FY2010. General Revenue Fund collections would also decrease by roughly $3.1 million per year due to a decrease in tobacco consumption. Additional administrative costs to the Tax Department would be $16,475 in the current fiscal year and $12,852 next fiscal year due to notifying taxpayers of the rate changes, revising forms and assessing floor stock on cigarette stamps. Thereafter, there would be no additional administrative costs.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2009
Increase/Decrease
(use"-")
2010
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 16,475 12,852 0
Personal Services 12,048 12,048 0
Current Expenses 4,327 804 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 100 0 0
2. Estimated Total Revenues 0 0 -3,100,000


Explanation of above estimates (including long-range effect):


As written, this bill proposes to raise the excise tax on cigarettes from the current rate of 55 cents per pack to $1.20 per pack, resulting in a gain of roughly $102.3 million per year. Also, the bill raises the tax rate on all other tobacco products from 7% of the wholesale price to 14% of the wholesale price. This increase may yield about $5 million per year. These estimates include consumption declines in response to price increases associated with changes in tax rates. This bill provides that one-half of all Tobacco Products Excise Tax collections be deposited in a special account in the State Treasury (i.e., the Governor’s Office of Health Enhancement and Lifestyle Planning Fund). This new fund would accrue roughly $110.4 million per year beginning in FY2010. General Revenue Fund collections would also decrease by roughly $3.1 million per year due to a decrease in tobacco consumption. Additional administrative costs to the Tax Department would be $16,475 in the current fiscal year and $12,852 next fiscal year due to notifying taxpayers of the rate changes, revising forms and assessing floor stock on cigarette stamps. Thereafter, there would be no additional administrative costs.



Memorandum


The stated purpose of this bill is to raise the cigarette tax to the national average, to raise the tax on other tobacco products to fourteen percent of their wholesale price and to establish a special revenue account to fund the Governor’s Office of Health System Improvement. This bill was recommended for passage during the 2009 Regular Session by Select Committee D on Health. The effective date in the bill is problematic in that the former rate is stricken, the former effective date is stricken and the effective date for the new rates has been substituted. This leaves open questions as to the effect of the old rates prior to the new rates being implemented.



    Person submitting Fiscal Note: Mark Muchow
    Email Address: kpetry@tax.state.wv.us