FISCAL NOTE



FUND(S):

General Revenue Fund, Healthy West Virginia Account

Sources of Revenue:

General Fund,Other Fund see above

Legislation creates:

A New Program



Fiscal Note Summary


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


The stated purpose of this bill is to promote better health among the citizens of West Virginia by providing for funding for programs to discourage tobacco use, giving preference in state bidding procedures to employers who offer health insurance to employees, requiring health insurance plans to cover the cost of smoking cessation programs; to allow personal and corporate tax credits for smoking cessation programs and providing for or paying for exercise programs; prohibiting the advertisement of tobacco products at certain events; limiting sponsorship by tobacco interest; increasing the tobacco excise tax on all tobacco products; and, creating a special revenue account to cover the expenses of tobacco cessation advertising. As written, this bill would increase the tax on cigarettes from $0.55 per pack of twenty cigarettes to $1.10 per pack, increase the tax on other tobacco products from seven percent to fourteen percent and provide refundable tax credits applicable against the Personal Income Tax and Corporation Net Income Tax. The bill would redirect one-third of the revenue collected from the taxes on cigarettes and other tobacco products from the General Revenue Fund to the “Healthy West Virginia Account.” Additionally, the bill would make other changes as indicated in the stated purpose. According to our interpretation, passage of this bill would result in an increase in the Cigarette Tax from roughly $106.7 million per year to roughly $194.6 million per year and an increase in the Other Tobacco Products Tax from roughly $5.1 million per year to roughly $9.5 million per year. The allocation of one-third of the total Cigarette Tax and Other Tobacco Products Tax to the “Healthy West Virginia Account” would result in roughly $68.1 million in additional revenue for that account. The remaining Cigarette Tax and Other Tobacco Products Tax would be deposited into the General Revenue Fund. The application of refundable tax credits against the Personal Income Tax and Corporation Net Income Tax of up to $4 million each would limit the net increase in the General Revenue Fund of roughly $16.2 million per year. Additional administrative costs to the State Tax Department associated with this bill could be significant. Other State agencies responsible for other aspects of the proposed legislation may also incur additional administrative costs.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2008
Increase/Decrease
(use"-")
2009
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 0 0
Personal Services 0 0 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 0
2. Estimated Total Revenues 0 84,300,000 84,300,000


Explanation of above estimates (including long-range effect):


The stated purpose of this bill is to promote better health among the citizens of West Virginia by providing for funding for programs to discourage tobacco use, giving preference in state bidding procedures to employers who offer health insurance to employees, requiring health insurance plans to cover the cost of smoking cessation programs; to allow personal and corporate tax credits for smoking cessation programs and providing for or paying for exercise programs; prohibiting the advertisement of tobacco products at certain events; limiting sponsorship by tobacco interest; increasing the tobacco excise tax on all tobacco products; and, creating a special revenue account to cover the expenses of tobacco cessation advertising. As written, this bill would increase the tax on cigarettes from $0.55 per pack of twenty cigarettes to $1.10 per pack, increase the tax on other tobacco products from seven percent to fourteen percent and provide refundable tax credits applicable against the Personal Income Tax and Corporation Net Income Tax. The bill would redirect one-third of the revenue collected from the taxes on cigarettes and other tobacco products from the General Revenue Fund to the “Healthy West Virginia Account.” Additionally, the bill would make other changes as indicated in the stated purpose. According to our interpretation, passage of this bill would result in an increase in the Cigarette Tax from roughly $106.7 million per year to roughly $194.6 million per year and an increase in the Other Tobacco Products Tax from roughly $5.1 million per year to roughly $9.5 million per year. The allocation of one-third of the total Cigarette Tax and Other Tobacco Products Tax to the “Healthy West Virginia Account” would result in roughly $68.1 million in additional revenue for that account. The remaining Cigarette Tax and Other Tobacco Products Tax would be deposited into the General Revenue Fund. The application of refundable tax credits against the Personal Income Tax and Corporation Net Income Tax of up to $4 million each would limit the net increase in the General Revenue Fund of roughly $16.2 million per year. Additional administrative costs to the State Tax Department associated with this bill could be significant. Since there are caps on the amount of credit that may be applied against the Personal Income Tax and the Corporation Net Income Tax, the State Tax Department will be required to closely monitor more than 800,000 tax returns. Other State agencies responsible for other aspects of the proposed legislation may also incur additional administrative costs.



Memorandum


The stated purpose of this bill is to promote better health among the citizens of West Virginia by providing for funding for programs to discourage tobacco use, giving preference in state bidding procedures to employers who offer health insurance to employees, requiring health insurance plans to cover the cost of smoking cessation programs; to allow personal and corporate tax credits for smoking cessation programs and providing for or paying for exercise programs; prohibiting the advertisement of tobacco products at certain events; limiting sponsorship by tobacco interest; increasing the tobacco excise tax on all tobacco products; and, creating a special revenue account to cover the expenses of tobacco cessation advertising. The bill, as written, provides a credit against Personal Income Tax for amounts expended by any taxpayer for a smoking cessation program or for membership at an exercise facility. The credit is also available when the taxpayer establishes an exercise facility or a smoking cessation program. The credit could possibly be interpreted to apply when a taxpayer purchases home exercise equipment or expands their domicile to include among other activities exercise equipment. There are similar provisions for application of the credit against the Corporation Net Income Tax. However, the bill does not provide any guidance on how the credit is calculated or what costs may be included. Additionally, there is no guidance on how to handle credit claims in excess of the stated maximum cap.



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