Date Requested:January 22, 2011
Time Requested:10:53 AM
Agency: State Tax Department
CBD Number: Version: Bill Number: Resolution Number:
2011R1507 Introduced HB2729
CBD Subject: TOBACCO TAX
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 $1.25 per pack, resulting in a gain of roughly $100.7 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 $108.9 million per year beginning in FY2012. General Revenue Fund collections would also decrease by roughly $3.2 million per year due to a decrease in tobacco consumption.
    
    Additional administrative costs to the State Tax Department would be $65,000 during the current fiscal year due to programming changes and notifying taxpayers of the rate changes. Thereafter, there would be no additional costs.
    

Fiscal Note Detail
Over-all effect
Effect of Proposal Fiscal Year
2011
Increase/Decrease
(use"-")
2012
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 65,000 0 0
Personal Services 0 0 0
Current Expenses 1,000 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 64,000 0 0
2. Estimated Total Revenues 0 0 105,700,000
3. 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 $1.25 per pack, resulting in a gain of roughly $100.7 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 $108.9 million per year beginning in FY2012. General Revenue Fund collections would also decrease by roughly $3.2 million per year due to a decrease in tobacco consumption.
    
    Additional administrative costs to the State Tax Department would be $65,000 during the current fiscal year due to programming changes and notifying taxpayers of the rate changes. Thereafter, there would be no additional costs.


Memorandum
Person submitting Fiscal Note:
Mark Muchow
Email Address:
kerri.r.petry@wv.gov
    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 bill provides that for the first fiscal year ending June 30, 2010, expenditures are authorized from collections. This proviso should be updated because the State is in the fiscal year ending June 30, 2011. However, the stated effective date for the amendments to Section 11-17-3 is July 1, 2011. As worded this creates confusion.