Date Requested: February 06, 2015
Time Requested: 03:08 PM
Agency: State Tax & Revenue Department
CBD Number: Version: Bill Number: Resolution Number:
1302 Introduced HB2634
CBD Subject: Health


FUND(S):

General Revenue Fund

Sources of Revenue:

General 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 the bill is to raise the tax on tobacco and tobacco related products.
    
    According to our interpretation, passage of this bill would result in an increase in the Cigarette Excise Tax rate from $0.55 per pack to $1.55 per pack and in the increase in the Other Tobacco Products Excise Tax rate from 7% of wholesale price to 50% of wholesale price. The bill contains no internal effective dates for such changes. Therefore, these tax changes would be implemented 90 days from passage or sometime in the middle of June 2015. The net annual revenue gain from these tax changes would be roughly $138.7 million beginning in FY2016.
    
    Under current Law, all proceeds from these excise taxes are deposited in the State General Revenue Fund. The language of the bill strikes out the reference to General Revenue Fund deposit for the Cigarette Excise Tax, but retains the language for purposes of the Other Tobacco Products Tax. The bill fails to create any new special revenue fund. The provisions of the bill also direct the Legislature regarding appropriation of future funds. These appropriation directions include the following:
    
    ● $90 million for the Bureau of Medical Services per year for 10 years
    ● $6 million for tobacco control
    ● $1 million for the WVU School of Public Health per year for five years
    ● 30% of additional moneys for oral health improvement
    ● 30% of additional moneys for substance abuse prevention and treatment
    ● 24% of additional moneys for in-home elderly care services
    ● 16% of additional funds for early childhood development programming
    
    Under the assumption that the term "additional moneys in the fund" refers to the $138.7 million projected increase in tax revenues, appropriations of the additional moneys in the first year would be roughly as follows:
    
    $138.7 million -$97 million already used = $41.7 million
    ● $12.51 million for oral health improvement
    ● $12.51 million for substance abuse prevention and treatment
    ● $10.00 million for in-home elderly care services
    ● $ 6.67 million for early childhood development programming
    
    Funding levels for these additional services funded on a percentage basis would decrease by 1% per year due to a long-term trend of lower tobacco consumption.
    
    Administrative costs to the Tax Department will be $60,000 in the current fiscal year.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2015
Increase/Decrease
(use"-")
2016
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 60,000 0 0
Personal Services 60,000 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 0 138,700,000 138,700,000


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


    According to our interpretation, passage of this bill would result in an increase in the Cigarette Excise Tax rate from $0.55 per pack to $1.55 per pack and in the increase in the Other Tobacco Products Excise Tax rate from 7% of wholesale price to 50% of wholesale price. The bill contains no internal effective dates for such changes. Therefore, these tax changes would be implemented 90 days from passage or sometime in the middle of June 2015. The net annual revenue gain from these tax changes would be roughly $138.7 million beginning in FY2016.
    
    Under current Law, all proceeds from these excise taxes are deposited in the State General Revenue Fund. The language of the bill strikes out the reference to General Revenue Fund deposit for the Cigarette Excise Tax, but retains the language for purposes of the Other Tobacco Products Tax. The bill fails to create any new special revenue fund. The provisions of the bill also direct the Legislature regarding appropriation of future funds. These appropriation directions include the following:
    
    ● $90 million for the Bureau of Medical Services per year for 10 years
    ● $6 million for tobacco control
    ● $1 million for the WVU School of Public Health per year for five years
    ● 30% of additional moneys for oral health improvement
    ● 30% of additional moneys for substance abuse prevention and treatment
    ● 24% of additional moneys for in-home elderly care services
    ● 16% of additional funds for early childhood development programming
    
    Under the assumption that the term "additional moneys in the fund" refers to the $138.7 million projected increase in tax revenues, appropriations of the additional moneys in the first year would be roughly as follows:
    
    $138.7 million -$97 million already used = $41.7 million
    ● $12.51 million for oral health improvement
    ● $12.51 million for substance abuse prevention and treatment
    ● $10.00 million for in-home elderly care services
    ● $ 6.67 million for early childhood development programming
    
    Funding levels for these additional services funded on a percentage basis would decrease by 1% per year due to a long-term trend of lower tobacco consumption.
    
    Administrative costs to the Tax Department will be $60,000 in the current fiscal year.



Memorandum


    The stated purpose of the bill is to raise the tax on tobacco and tobacco related products.
    
    The proposed bill strikes the stated purpose of providing for the General Revenue Fund. The subsection begins, “of the increase in revenues...” This implies that the base or current rates remain for the General Fund though that purpose has been stricken. Finally, it appears that all the funding is to be used by agencies within DHHR, but no specific funds are named.
    
    “Adding” $6 million annually for tobacco control and $1 million per year for 5 years to the WVU School of Public Health does not make sense in context. It is unclear whether the funds are in addition to the $90 million or added up individually each year (e.g. $6 million one year, $12 million the next).
    
    There is no indication of what agencies will be reporting to the Legislative Oversight Committee.
    



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