Date Requested:February 21, 2011
Time Requested:02:07 PM
Agency: State Tax Department
CBD Number: Version: Bill Number: Resolution Number:
2011R2897 Introduced HB3239
CBD Subject: NON CIGARETTE TOBACCO TAX
FUND(S)
General Revenue Fund, the Department of Agriculture's Crop Transition Programs & the Unemployment Compensation Trust Fund
Sources of Revenue
General Fund,Special Fund
Legislation creates:
Neither Program nor Fund

Fiscal Note Summary

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

     The stated purpose of this bill is to abolish the food tax, increase the tax on nonintoxicating beer per barrel from $5.50 to $6.35, increase the tax on cigarettes to $1.55, increase the tax on noncigarette tobacco products from seven to fourteen percent, and to dedicate the first $5 million of revenue to the Department of Agriculture‚Äôs crop transition program and half of the other revenue collected to the Unemployment Compensation Trust Fund.
    
     As written, the passage of this bill would eliminate the Consumers Sales Tax on food for home consumption beginning on July 1, 2011. Also, this bill would raise the tax rate on beer from the current rate of $5.50 per barrel to $6.35 per barrel, increase the tax on cigarettes from the current rate of 55 cents per pack to $1.55 per pack, and raise the tax rate on other tobacco products (OTP) from the current rate of 7% to 14% of the wholesale price.
    
     The bill dedicates the first $5 million in Tobacco Products Excise Tax revenue during the first year of effect to the Department of Agriculture for crop transition programs. In addition, one-half of all other Tobacco Products Excise Tax collections shall be dedicated to the Unemployment Compensation Trust Fund. The following table provides estimates of revenue consequences associated with the passage of this bill. The estimates for the rate increases in the Beer Barrel Tax and the Tobacco Products Excise Tax include consumption declines due to response to price increases associated with changes in tax rates.
    
     Net Effect of
     Beer Barrel Tax
     Sales of Food & Tobacco Products
     Meant for Home Excise Tax Rate Increases Total Net Effect
     Consumption Only & Movement of Funds to the GRF
    
    FY2012 -$ 71.5 million $0.5 million -$71.0 million
    FY2013 -$ 78.0 million $8.8 million -$69.2 million
    
    The gain to the Unemployment Compensation Trust Fund would be $111.6 million in FY2012. Thereafter, the gain to the Unemployment Compensation Trust Fund would be about $118.9 million per year. The loss to the General Revenue Fund is estimated to be $71.0 million in FY2012 and roughly $69.2 million per year, thereafter.
    
    Additional administrative costs to the State Tax Department would be $14,400 during the current fiscal year due to notifying taxpayers of the various rate changes. Thereafter, there would be no additional administrative 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 14,400 0 0
Personal Services 0 0 0
Current Expenses 14,400 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 0
2. Estimated Total Revenues 0 -71,000,000 -69,200,000
3. Explanation of above estimates (including long-range effect):
    As written, the passage of this bill would eliminate the Consumers Sales Tax on food for home consumption beginning on July 1, 2011. Also, this bill would raise the tax rate on beer from the current rate of $5.50 per barrel to $6.35 per barrel, increase the tax on cigarettes from the current rate of 55 cents per pack to $1.55 per pack, and raise the tax rate on other tobacco products (OTP) from the current rate of 7% to 14% of the wholesale price.
    
    The bill dedicates the first $5 million in Tobacco Products Excise Tax revenue during the first year of effect to the Department of Agriculture for crop transition programs. In addition, one-half of all other Tobacco Products Excise Tax collections shall be dedicated to the Unemployment Compensation Trust Fund. The following table provides estimates of revenue consequences associated with the passage of this bill. The estimates for the rate increases in the Beer Barrel Tax and the Tobacco Products Excise Tax include consumption declines due to response to price increases associated with changes in tax rates.
    
     Net Effect of
     Beer Barrel Tax
     Sales of Food & Tobacco Products
     Meant for Home Excise Tax Rate Increases Total Net Effect
     Consumption Only & Movement of Funds to the GRF
    
    FY2012 -$ 71.5 million $0.5 million -$71.0 million
    FY2013 -$ 78.0 million $8.8 million -$69.2 million
    
    The gain to the Unemployment Compensation Trust Fund would be $111.6 million in FY2012. Thereafter, the gain to the Unemployment Compensation Trust Fund would be about $118.9 million per year. The loss to the General Revenue Fund is estimated to be $71.0 million in FY2012 and roughly $69.2 million per year, thereafter.
    
    Additional administrative costs to the State Tax Department would be $14,400 during the current fiscal year due to notifying taxpayers of the various rate changes. Thereafter, there would be no additional administrative costs.


Memorandum
Person submitting Fiscal Note:
Mark Muchow
Email Address:
kerri.r.petry@wv.gov