CHARLESTON, W.Va. – The Legislature’s Joint Select Committee on Tax Reform today released results from a West Virginia University Bureau of Business and Economic Research study analyzing potential changes to tobacco tax policy in West Virginia.
The tax reform committee last year asked WVU researchers to analyze the effects of potential changes to the tobacco tax. The completion of their report coincides with discussions on tobacco tax proposals currently pending in the Legislature.
The report, conducted by John Deskins, Brian Lego and Christiadi, analyzed various changes to the tax rate on cigarettes, as well as potential purchasing declines as a result of an increased tax.
The report estimated that a 45-cent increase in the current 55-cent per pack tax on cigarettes would lead to a 6 to 12 percent decline in purchases, with an overall tax revenue increase between $60 and $69 million.
A $1 increase in the tax was projected to cause a 14 to 27 percent decline in cigarette purchases, resulting in an increase of revenue between $101 million to $134 million.
The report also finds there would be some increase in consumer sales tax revenue with each increase to the wholesale tobacco tax.
“This report provides a good snapshot of where we are and where we could go in changing this policy,” said Senate Finance Chairman Mike Hall, R-Putnam. “A key component of this report is the economic analysis of how any potential increase could affect consumer behavior and result in reductions of cigarette purchases.”
The Senate has already passed a bill (SB 420) that would increase the tobacco tax by $1 per pack. The Finance Committee of the House of Delegates should begin consideration of the Senate’s bill on Thursday.
“As we’re going through the various options available to balance our budget, this report provides a thorough picture of how this one particular tax issue could affect our revenue situation,” said House Finance Committee Chairman Eric Nelson, R-Kanawha. “This report will certainly assist our members in their discussions on whether to keep the $1 Senate proposal or the governor’s plan for just a 45-cent increase.”
A copy of the study can be viewed here.