FISCAL NOTE

Date Requested: February 15, 2016
Time Requested: 03:05 PM
Agency: Tax Department, State
CBD Number: Version: Bill Number: Resolution Number:
2709 Introduced SB607
CBD Subject: Taxation


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 this bill is to increase the excise tax on cigarettes and tobacco products, to impose tax resulting from a rate change on inventories, to specify due dates for payment of tax resulting from a rate change on cigarette stamps, to levy a tax upon e -cigarette liquid, to provide for the administration and enforcement of the tax on e-cigarette liquid, all effective April 1, 2016 and to dedicate a portion of the revenues generated to the tobacco cessation efforts of the Department of Health and Human Resources.
    
    The bill increases the tax on cigarettes from $.55 to $1.00, increases the rate of tax on tobacco products other than cigarettes from seven percent of the wholesale price to twelve percent, and establishes a new tax of $.075 per milliliter of e-cigarette liquid.
    
    The official FY2017 estimates for the above changes are as follows:
    
    Cigarettes: $71.5 million
    Other Tobacco Products: $ 4.7 million
    E-Cigarette Fluid: $ 1.8 million
    Total: $78.0 million
    
    The effective date of April 1, 2016 allows some funds to be collected in the current fiscal year to balance the FY2016 budget. Though the increase in funds will be modest at first, as consumers may adjust their consumption to avoid paying the higher tax rates, revenues should increase enough to provide some deficit reduction. The increased tax rates will increase FY2016 collections by approximately $18.9 million.
    
    Further, the bill allocates $2.0 million from the revenue “generated by the increases” for cigarettes and other tobacco products, as well as the first $2.0 million from the new e-cigarette tax, to the Department of Health and Human Resources (DHHR) for tobacco cessation efforts. The bill will allocate a total of $6.0 million to DHHR, leaving up to $72.0 million for the General Revenue Fund.
    
    Additional administrative costs to the Tax Department will be $47,000 in the current fiscal year, $60,000 in FY2017, and $55,000 in each year thereafter.
    
    



Fiscal Note Detail


Effect of Proposal Fiscal Year
2016
Increase/Decrease
(use"-")
2017
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 47,000 60,000 55,000
Personal Services 0 35,000 35,000
Current Expenses 4,000 0 0
Repairs and Alterations 0 0 0
Assets 0 5,000 0
Other 43,000 20,000 20,000
2. Estimated Total Revenues 0 0 0


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


    The bill increases the tax on cigarettes from $.55 to $1.00, increases the rate of tax on tobacco products other than cigarettes from seven percent of the wholesale price to twelve percent, and establishes a new tax of $.075 per milliliter of e-cigarette liquid.
    
    The official FY2017 estimates for the above changes are as follows:
    
    Cigarettes: $71.5 million
    Other Tobacco Products: $ 4.7 million
    E-Cigarette Fluid: $ 1.8 million
    Total: $78.0 million
    
    The effective date of April 1, 2016 allows some funds to be collected in the current fiscal year to balance the FY2016 budget. Though the increase in funds will be modest at first, as consumers may adjust their consumption to avoid paying the higher tax rates, revenues should increase enough to provide some deficit reduction. The increased tax rates will increase FY2016 collections by approximately $18.9 million.
    
    Further, the bill allocates $2.0 million from the revenue “generated by the increases” for cigarettes and other tobacco products, as well as the first $2.0 million from the new e-cigarette tax, to the Department of Health and Human Resources (DHHR) for tobacco cessation efforts. The bill will allocate a total of $6.0 million to DHHR, leaving up to $72.0 million for the General Revenue Fund.
    
    Additional administrative costs to the Tax Department will be $47,000 in the current fiscal year, $60,000 in FY2017, and $55,000 in each year thereafter.
    
    



Memorandum


    The stated purpose of this bill is to increase the excise tax on cigarettes and tobacco products, to impose tax resulting from a rate change on inventories, to specify due dates for payment of tax resulting from a rate change on cigarette stamps, to levy a tax upon e -cigarette liquid, to provide for the administration and enforcement of the tax on e-cigarette liquid, all effective April 1, 2016 and to dedicate a portion of the revenues generated to the tobacco cessation efforts of the Department of Health and Human Resources.
    
    The bill does not create an account for the revenue. It is therefore assumed that the revenue will be deposited into a DHHR account.
    
    The title has a technical error: instead of Chapter 11 Article 17 Section 4b the title states Chapter 11 Article 1 Section 4b.
    
    



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