FISCAL NOTE
Date Requested: January 17, 2019
Time Requested: 01:59 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2108 |
Introduced |
HB2477 |
|
|---|
| CBD Subject: |
Taxation |
|---|
|
FUND(S):
General Revenue Fund
Sources of Revenue:
General Fund
Legislation creates:
Decreases Existing Revenue, Increases Existing Expenses
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
The stated purpose of this bill is to provide different tobacco products tax rates in certain counties of the state.
According to the provisions of this bill, effective July 1, 2019, in McDowell, Mercer, Monroe, Greenbrier, Pocahontas, Pendleton, Hardy, Hampshire, Morgan, Berkeley and Jefferson counties, the Cigarette Excise Tax Rate would be reduced from the current $1.20 per pack of 20 cigarettes to $0.30 per pack of 20 cigarettes and the rate for Other Tobacco Products (OTP) would be reduced from 12% of the wholesale price to 10% of the wholesale price. In Mingo, Wayne and Cabell counties, the Cigarette Excise Tax rate would be slightly reduced to $1.10 per pack of 20 cigarettes with no change in their respective OTP rates. Virginia currently has a $0.30 per pack cigarette tax rate and 10% tax rate based on the wholesale price of other tobacco products while Kentucky has a $1.10 per pack cigarette tax rate and 15% OTP rate. Passage of this bill would minimize border county General Revenue Fund cigarette revenue losses to the border states of Virginia and Kentucky. However, the opportunity cost of this revenue gain would likely be a significant level of migration of customers in the higher rate interior counties to purchase cigarettes in the selected border counties with the proposed lower rates. Cigarette smuggling is also more likely to occur in the 41 non-border counties where the cigarette tax rates would remain the same. Passage of this bill would reduce General Revenue Fund collections by roughly $27 million in FY2020 and thereafter. The provisions of this bill would likely result in increased tobacco sales in West Virginia, including an additional 6 million packs of cigarettes.
Additional administrative costs incurred by the State Tax Department would be $70,000 in FY2019, $260,000 in FY2020 and $250,000 in subsequent fiscal years.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2019
Increase/Decrease
(use"-") |
2020
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
70,000 |
260,000 |
250,000 |
| Personal Services |
20,000 |
250,000 |
250,000 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
10,000 |
0 |
| Other |
50,000 |
0 |
0 |
| 2. Estimated Total Revenues |
0 |
-27,000,000 |
27,000,000 |
Explanation of above estimates (including long-range effect):
According to the provisions of this bill, effective July 1, 2019, in McDowell, Mercer, Monroe, Greenbrier, Pocahontas, Pendleton, Hardy, Hampshire, Morgan, Berkeley and Jefferson counties, the Cigarette Excise Tax Rate would be reduced from the current $1.20 per pack of 20 cigarettes to $0.30 per pack of 20 cigarettes and the rate for Other Tobacco Products (OTP) would be reduced from 12% of the wholesale price to 10% of the wholesale price. In Mingo, Wayne and Cabell counties, the Cigarette Excise Tax rate would be slightly reduced to $1.10 per pack of 20 cigarettes with no change in their respective OTP rates. Virginia currently has a $0.30 per pack cigarette tax rate and 10% tax rate based on the wholesale price of other tobacco products while Kentucky has a $1.10 per pack cigarette tax rate and 15% OTP rate. Passage of this bill would minimize border county General Revenue Fund cigarette revenue losses to the border states of Virginia and Kentucky. However, the opportunity cost of this revenue gain would likely be a significant level of migration of customers in the higher rate interior counties to purchase cigarettes in the selected border counties with the proposed lower rates. Cigarette smuggling is also more likely to occur in the 41 non-border counties where the cigarette tax rates would remain the same. Passage of this bill would reduce General Revenue Fund collections by roughly $27 million in FY2020 and thereafter. The provisions of this bill would likely result in increased tobacco sales in West Virginia, including an additional 6 million packs of cigarettes.
Additional administrative costs incurred by the State Tax Department would be $70,000 in FY2019, $260,000 in FY2020 and $250,000 in subsequent fiscal years.
Memorandum
The stated purpose of this bill is to provide different tobacco products tax rates in certain counties of the state.
Article X ยง1 of the West Virginia Constitution requires that taxation to be equal and uniform throughout the state. Under this bill, the tax rate on the same tobacco product could have three different rates in the state depending on the county where the purchase was made. Although the intent of this bill is to keep purchasers of cigarettes and other tobacco products for crossing the border to another state, the different tax rates may also deprive counties within the state from sales as people may go into border counties rather than interior counties to purchase cigarettes and other tobacco products.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov