Date Requested:February 09, 2005
Time Requested:02:54 PM
Agency: State Tax Department
CBD Number: Version: Bill Number: Resolution Number:
2005R106 intro HB2008
CBD Subject: CIGARETTE TAX INCREASE
FUND(S)
General Revenue Fund, Department of Agriculture's Crop Transition Programs
Sources of Revenue
General Fund,Other Fund Crop Transition Program
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 increase from fifty-five cents to one dollar and fifty-five cents the rate of the tax on cigarettes and reduce the consumer sales tax on food sold for home consumption from 6% to 3%. The bill also dedicates the first five million dollars to the Department of Agriculture crop transition programs.
    
    As written, this bill would reduce the Consumers Sales Tax on food for home consumption from the current rate of 6% to 3%. Although the bill does not specifically define food, we assumed the rate reduction would apply to food sold at grocery stores intended for consumption off the premises where sold. This rate reduction would result in a loss to the General Revenue Fund of approximately $76 million annually.
    
    Also, the bill increases the Cigarette Excise Tax rate from the current 55 cents per pack of twenty to $1.55 per pack. As a result, the net gain to the General Revenue Fund would be about $58.9 million per year. This estimate includes a slight decline in consumption due to higher prices at the retail level.
    
    The total revenue effect from the passage of this bill would be a net loss to the General Revenue Fund of approximately $17.1 million per year. The bill dedicates the first $5 million in Cigarette Tax revenue during the first year of effect to the Department of Agriculture for crop transition programs. Therefore, the loss to the General Revenue Fund would be $20.7 million in FY2006.
    
    Additional administration costs to the Tax Department would be $36,000 in the current fiscal year due to notifying taxpayers of the rate changes and for printing pressure stamps for retailers to apply to cigarettes as evidence the additional tax rate was paid. Thereafter, there would be no additional administrative costs to the Department.
    
    

Fiscal Note Detail
Over-all effect
Effect of Proposal Fiscal Year
2005
Increase/Decrease
(use"-")
2006
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 36,000 0 0
Personal Services 0 0 0
Current Expenses 36,000 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 0
2. Estimated Total Revenues 0 -20,700,000 -17,100,000
3. Explanation of above estimates (including long-range effect):
    As written, this bill would reduce the Consumers Sales Tax on food for home consumption from the current rate of 6% to 3%. Although the bill does not specifically define food, we assumed the rate reduction would apply to food sold at grocery stores intended for consumption off the premises where sold. This rate reduction would result in a loss to the General Revenue Fund of approximately $76 million annually.
    
    Also, the bill increases the Cigarette Excise Tax rate from the current 55 cents per pack of twenty to $1.55 per pack. As a result, the net gain to the General Revenue Fund would be about $58.9 million per year. This estimate includes a slight decline in consumption due to higher prices at the retail level.
    
    The total revenue effect from the passage of this bill would be a net loss to the General Revenue Fund of approximately $17.1 million per year. The bill dedicates the first $5 million in Cigarette Tax revenue during the first year of effect to the Department of Agriculture for crop transition programs. Therefore, the loss to the General Revenue Fund would be $20.7 million in FY2006. Since the effective date of the bill is July 1, 2005, the first year only includes eleven months of collections at the new tax rates.
    
    Additional administration costs to the Tax Department would be $36,000 in the current fiscal year due to notifying taxpayers of the rate changes and for printing pressure stamps for retailers to apply to cigarettes as evidence the additional tax rate was paid. Thereafter, there would be no additional administrative costs to the Department.
    


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