Date Requested:February 18, 2011
Time Requested:04:16 PM
Agency: State Tax Department
CBD Number: Version: Bill Number: Resolution Number:
Comm. Sub. SB362
CBD Subject: EXCISE TAX ON TOBACCO PRODUCTS
FUND(S)
General Revenue Fund & West Virginia Retiree Health Benefit Trust 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.

    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 of the “increase in revenues collected pursuant to this section”, $50 million per year for the next ten years will be deposited in a special account in the State Treasury (i.e., the West Virginia Retiree Health Benefit Trust Fund). Another $40 million per year for ten years shall be designated to West Virginia Medicaid. Also, $6 million shall be dedicated annually for tobacco control and another $1 million per year for five years will be designated to the West Virginia University School of Public Health. Any additional amounts are to be expended as follows: 30 percent for oral health improvement, 30 percent for substance abuse prevention and treatment, 24 percent for in-home elderly care services, and 16 percent for early childhood development programs.
    
    The bill strikes current language in the code which states that revenues received from both the cigarette tax and the tax on other tobacco products be deposited in the General Revenue Fund. This creates confusion as to the current revenue stream for the Tobacco Excise Tax. As a result, there could be a loss to the General Revenue Fund of about $112 million per year and an increase in special revenue funds of more than $241 million. The special revenue would be allocated to the OPEB Trust Fund–$50 million, Medicaid–$40 million, Tobacco Control–$6 million, WVU School of Public Health–$1 million, Oral Health Improvement–$43.3 million, Substance Abuse Prevention and Treatment-$43.3 million, In-Home Elderly Care Services–$34.6 million and Childhood Development–$23.1 million.
    
    Additional administrative costs to the State Tax Department would be minimal 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 1,300 0 0
Personal Services 0 0 0
Current Expenses 800 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 500 0 0
2. Estimated Total Revenues 0 0 0
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 of the “increase in revenues collected pursuant to this section”, $50 million per year for the next ten years will be deposited in a special account in the State Treasury (i.e., the West Virginia Retiree Health Benefit Trust Fund). Another $40 million per year for ten years shall be designated to West Virginia Medicaid. Also, $6 million shall be dedicated annually for tobacco control and another $1 million per year for five years will be designated to the West Virginia University School of Public Health. Any additional amounts are to be expended as follows: 30 percent for oral health improvement, 30 percent for substance abuse prevention and treatment, 24 percent for in-home elderly care services, and 16 percent for early childhood development programs.
    
    The bill strikes current language in the code which states that revenues received from both the cigarette tax and the tax on other tobacco products be deposited in the General Revenue Fund. This creates confusion as to the current revenue stream for the Tobacco Excise Tax. As a result, there could be a loss to the General Revenue Fund of about $112 million per year and an increase in special revenue funds of more than $241 million. The special revenue would be allocated to the OPEB Trust Fund–$50 million, Medicaid–$40 million, Tobacco Control–$6 million, WVU School of Public Health–$1 million, Oral Health Improvement–$43.3 million, Substance Abuse Prevention and Treatment-$43.3 million, In-Home Elderly Care Services–$34.6 million and Childhood Development–$23.1 million.
    
    Additional administrative costs to the State Tax Department would be minimal 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 Committee Substitute for SB 362 designates where the “increase in revenues collected pursuant to this section” are to be deposited. With the deletion of the former amount of tax (i.e., one half of all monies collected, which was in the original bill), the increase would not be evident on the face of the statute.
    
    Also, the bill strikes current language in W.V. Code §11-17-3 that provides for all Tobacco Products Excise Tax collections be deposited in the General Revenue Fund. This creates confusion as to the current revenue stream of Tobacco Products Excise Tax collections.