Date Requested:February 01, 2011
Time Requested:04:26 PM
Agency: State Tax Department
CBD Number: Version: Bill Number: Resolution Number:
2011R2380 Introduced HB2973
CBD Subject: EXCISE TAX ON TOBACCO PRODUCTS
FUND(S)
General Revenue Fund & West Virginia Healthy Future 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 increase the excise tax on cigarettes by $1.00 per pack; the bill increases the excise tax on all other tobacco products from seven percent of their wholesale price to fifty percent. The bill also establishes a special revenue account and designates where the additional revenues are to be transferred, with half the proceeds to certain health related issues and the other half to the General Revenue Fund.
    
    As written, this bill proposes to raise the excise tax on cigarettes from the current rate of 55 cents per pack to $1.55 per pack, resulting in a gain of roughly $121.5 million per year. Also, the bill raises the tax rate on all other tobacco products from 7% of the wholesale price to 50% of the wholesale price. This increase may yield about $7.3 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 West Virginia Healthy Future Fund), up to an annual amount of $60 million. Any additional amount would remain in the General Revenue Fund. As a result, General Revenue Fund collections would increase by a total of roughly $68.8 million per year and the new West Virginia Healthy Future Fund would gain $60 million per year due to the increase in the tax rates.
    
    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 0 128,800,000
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 $1.55 per pack, resulting in a gain of roughly $121.5 million per year. Also, the bill raises the tax rate on all other tobacco products from 7% of the wholesale price to 50% of the wholesale price. This increase may yield about $7.3 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 West Virginia Healthy Future Fund), up to an annual amount of $60 million. Any additional amount would remain in the General Revenue Fund. As a result, General Revenue Fund collections would increase by a total of roughly $68.8 million per year and the new West Virginia Healthy Future Fund would gain $60 million per year due to the increase in the tax rates.
    
    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