Date Requested: February 19, 2015
Time Requested: 03:34 PM
Agency: Tax Department, State
CBD Number: Version: Bill Number: Resolution Number:
3162 Introduced SB531
CBD Subject: Tax


FUND(S):

General Revenue Fund, Other Funds

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 the bill is to increase the cigarette tax incrementally by a total of $1 per pack in order to fund substance abuse and workforce development initiatives. The bill sets forth timing of increases. The bill details how the newly generated funds are to be distributed.
    
    According to our interpretation, the bill will increase revenue by $79.5 million in FY2016, $102.8 million in FY2017, and $126.6 million in FY2018. There will be an initial increase in sales tax revenue of $1.9 million in FY2016, then a decrease of $400,000 in FY2017, and $1.8 million in FY2018 due to changes in cigarette consumption because of the increasing tax rates. The relatively smaller increase in the tax in FY2016 will not decrease consumption enough to decrease sales tax revenue. In FY2016 the first $10 million will fund substance abuse programs, and the second $10 million will fund workforce initiatives. The allocations will increase to $15 million each in FY2017, and $20 million each in FY2018.
    
    Administrative costs to the Tax Department will be $60,000 per year in FY2015, FY2016 and FY2017. Thereafter, there would be no additional administrative costs.



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 60,000 60,000
Personal Services 0 0 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 60,000 60,000 60,000
2. Estimated Total Revenues 0 0 0


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


    According to our interpretation, the bill will increase revenue by $79.5 million in FY2016, $102.8 million in FY2017, and $126.6 million in FY2018. There will be an initial increase in sales tax revenue of $1.9 million in FY2016, then a decrease of $400,000 in FY2017, and $1.8 million in FY2018 due to changes in cigarette consumption because of the increasing tax rates. The relatively smaller increase in the tax in FY2016 will not decrease consumption enough to decrease sales tax revenue. In FY2016 the first $10 million will fund substance abuse programs, and the second $10 million will fund workforce initiatives. The allocations will increase to $15 million each in FY2017, and $20 million each in FY2018.
    
    Administrative costs to the Tax Department will be $60,000 per year in FY2015, FY2016 and FY2017. Thereafter, there would be no additional administrative costs.



Memorandum


    The stated purpose of the bill is to increase the cigarette tax incrementally by a total of $1 per pack in order to fund substance abuse and workforce development initiatives. The bill sets forth timing of increases. The bill details how the newly generated funds are to be distributed.
    
    The term “workforce development initiative” is not clearly defined or limited.
    
    The language of the proposed statute seems to restrict the distributions to the “revenues generated by the increases.” Presumably, that would apply only to the amount of tax over and above the current fifty-five cents per pack. Amounts attributable to the increased tax would be deposited into the General Revenue Fund. The current statute requires cigarette tax revenues be deposited into the General Revenue Fund; therefore, the creation of special funds for the ear-marked revenue distributions may not be needed.
    



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