California Tax Excise Tax Increase - PDF

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					                     2009 State Tobacco Excise Tax Increase Proposals Snapshot
                                           May 14, 2009

Since 2000, federal and state governments have increased their cigarette excise tax rates 96 times. In fiscal
year (FY) 2008, federal and state governments received $22.6 billion in tobacco product excise tax revenues,
compared to $13.5 billion in FY 1998. Below is a summary of 2009 bills containing a state excise tax (SET)
increase on cigarettes and other tobacco products (OTP).

Alabama
House Bill (HB) 134 would increase Alabama’s cigarette excise tax from $0.425 to $0.75 per pack, a $0.325
increase. The bill is under consideration in the House Committee on Government Appropriations.

California
The California legislature is considering several excise tax proposals. Assembly Bill 89 would increase the
state’s cigarette excise tax by $2.10 from $0.87 per pack to $2.97 per pack with a corresponding increase in the
OTP rate. Senate Bill 600 includes a $1.50 per pack tax increase for a total excise of $2.37. It would also peg
the amount of the tax to the Consumer Price Index, allowing it to rise with inflation. Assembly Constitutional
Amendment 22 would raise the excise tax by $1.48 for a total of $2.35 per pack with a corresponding increase
in the OTP rate, subject to the approval of a 2/3 majority of legislators and California voters.

Colorado
Colorado’s House and Senate have approved House Bill 1342, which removes the 2.9% state sales tax
exemption for cigarettes. If Governor Ritter (D) signs the bill, the policy will take effect July 1, 2009.

Connecticut
The Joint Finance Committee’s proposed budget includes a $0.50 increase in the cigarette tax, for a total
excise of $2.50 per pack. The increase would be effective on January 1, 2010.

Delaware
Governor Markell (D) has proposed a $0.45 increase in the cigarette tax as part of his 2009-2010 budget
recommendation. If passed, Delaware’s total excise tax would rise to $1.60 per pack.

Florida
The Florida legislature has approved Senate Bill 1840, which raises the state’s cigarette excise tax by $1.00, to
$1.339 per pack. The legislation also increases the ad valorem OTP tax rate from 25% to 85% (excluding
cigars). If signed by Governor Crist (R), the tax increases would take effect on July 1, 2009.

Illinois
On April 2, the Illinois Senate approved SB 44, which would increase the state’s cigarette excise tax by $1.00,
to $1.98. An amendment to the bill includes a phase-in of the tax over two years, with a $0.50 increase going
into effect on September 1, 2009 and the remaining $0.50 going into effect on September 1, 2010. The bill is
currently on its second reading in the House. House Bill 1196, which includes an increase in the ad valorem
OTP rate from 18% to 40%, passed the House Committee on Human Services on March 11. It has been re-
referred to the House Committee on Rules. The proposed effective date is September 1, 2009.

Kansas
House Bill 2327, under consideration in the House Committee on Taxation, contains a phased $0.95 increase
that would bring the total tax to $1.74 by 2014. The bill also increases the tax rate on OTP from 10% to 57%.

Louisiana
House Bill 889 would raise several tobacco tax rates. The excise tax on cigarettes would increase $0.50, to
$0.86 per pack. The tax rate on OTP (excluding cigars) would climb from 20% to 30%. The tax rate on cigars
invoiced by the manufacturer at $120 per thousand or less would increase from 8% to 12% of the invoice price,
and the tax rate on cigars invoiced by the manufacturer at more than $120 per thousand would increase from
20% to 30% of the invoice price.

Minnesota
HB 2323, the House version of Minnesota’s omnibus budget package, contains a $0.54 increase in the state’s
cigarette tax, for a total of $2.23 per pack. It would also convert Minnesota’s 70% ad valorem tax on MST to a

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                         Information provided by Altria Client Services Inc. on behalf of Philip Morris USA Inc.
weight-based methodology with a rate of $1.82/oz. The tobacco tax provisions are not included in the Senate
version of the budget legislation, SB 2074. Both bills have passed their respective chambers, and negotiations
on a final package are underway in a conference committee.

Missouri
Missouri House Bill 494 would raise the state’s cigarette excise tax by $0.16, to $0.33, with proceeds
earmarked to general revenue. The bill is pending in the House and a public hearing was held on February 25.
The proposed effective date is August 28, 2009.

North Carolina
Governor Perdue (D) has proposed raising the cigarette excise tax to $1.35 (a $1.00 increase) and raising the
tax on OTP from 10% to 28%. The Governor’s proposal is reflected in House Bill 916, currently pending in the
House Finance Committee.

New Hampshire
In his State of the State address on February 12, Governor Lynch (D) called for a $0.35 hike in the cigarette
excise tax. This proposal is reflected in the budget bill, House Bill 2, which would also increase the OTP tax
rate from 19% to 48.59%, including MST and cigars. The budget passed the House on April 9 and is under
consideration in the Senate.

New Jersey
Governor Corzine (R) proposed a $0.125 hike to $2.70 in the cigarette excise tax as part of his budget
recommendation.

Nevada
Assembly Bill 255 would increase the cigarette excise tax by $1.00, to a total of $1.80 per pack, to fund health
care programs. The bill is under consideration in the Assembly Ways and Means Committee.

New York
The New York legislature is considering a bill (AB 1027-A) to authorize Nassau, Orange, Putnam, Rockland,
Suffolk, Westchester, Dutchess and Rensselaer counties to adopt local cigarette and cigar taxes. The bill
specifies that the new cigarette tax rate must be set at $4.00 per pack. For cigars, the tax rate would be tiered,
based on the cigar's price ($0 for cigars sold at less than $0.14; $0.02 per cigar for cigars priced in the range of
$0.14 to $0.60 per cigar; $0.06 per cigar for cigars priced higher than $0.60 per cigar). Taxation authority for
specific counties is the subject of two other pending bills: SB 4036 (Nassau County) and SB 4989 (Suffolk
County). Finally, Assembly Bill 3300 would increase the cigarette excise tax rate from $2.75 to $3.50 to fund
tobacco use prevention and control programs.

Ohio
Senate Bill 37 would increase the ad valorem tax rate on OTP and MST from 17% to 34% of the wholesale
price. The bill is pending in the Senate Committee on Ways and Means and Economic Development.

Oregon
Governor Kulongoski (D) has announced his intent to seek an excise tax increase of $0.60 during the 2009
legislative session. The Governor’s proposal is reflected in HB 2122, which would bring the total cigarette
excise tax to $1.78 and increase the ad valorem tax rate on OTP from 65% to 90% of the wholesale price. The
bill is under consideration in the House Revenue Committee.

Pennsylvania
Governor Rendell (D) has proposed a $0.10 increase in Pennsylvania’s cigarette excise tax, to bring it to $1.45
per pack. The Governor’s plan also proposes a $0.36/oz. weight-based tax on MST and a $0.36 tax per 10 units
of cigars and cigarillos. Pennsylvania currently does not have a tax on large cigars or MST products.

Puerto Rico
Puerto Rico’s House Speaker has introduced HB 1413, establishing a $0.45 per unit tax on MST products. The
bill is under consideration in the House Finance Committee.




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                         Information provided by Altria Client Services Inc. on behalf of Philip Morris USA Inc.
South Carolina
The South Carolina House passed a $0.50 per pack tax increase, contained in HB 3584. This bill would bring
the total per-pack tax to $0.57 to fund health insurance tax credits. The bill is pending in the Senate.

Tennessee
Senate Bill 714, pending in the Senate Judiciary Committee, would increase the cigarette excise tax by $0.20,
from $0.62 to $0.82 per pack. Proceeds would fund crime prevention grants.

Wisconsin
Governor Doyle (D) proposed a $0.75 increase in the state’s cigarette excise tax in his budget, bringing the
total tax to $2.52 per pack. The Governor also called for an increase in the MST rate from $1.31 to $1.87/oz.
and an increase in the OTP rate from 50% to 71%. These proposals are reflected in Assembly Bill 75, under
consideration in the Joint Committee on Finance.

                                2009 Enacted Tobacco Excise Tax Increases

Federal Excise Tax (FET) Increase
On February 4, President Obama signed legislation to increase the FET rate on cigarettes by $0.6166, to
$1.0066 per pack. The bill also includes a tax increase on all other tobacco products, including MST products
to $1.51 per pound from $0.585 per pound. These increases became effective on April 1, 2009.

Arkansas
On February 17, the Governor Beebe (D) signed legislation to increase the excise tax rate on cigarettes by
$0.56 to $1.15 and increase the tax rate on OTP (including MST) from 32% to 68%. The legislation was
effective as of March 1, 2009.

Kentucky
The $0.30 cigarette excise tax increase signed by the Governor on February 13 went into effect on April 1. The
bill also increases the tax rate on MST products from $0.095 to $0.19 per unit and increases the rate on OTP
from 7.5% to 15%.

Hawaii
On May 7, Governor Lingle (R) approved a $0.40 increase in the state’s cigarette excise tax. Due to the already
scheduled increases, the new rates will be $2.60 per pack as of July 1, 2009, $2.80 per pack as of July 1, 2010,
and $3.00 per pack as of July 1, 2011. On May 9, the Hawaii Legislature voted to override the Governor's veto
on House Bill 895. The bill increases the OTP tax rate from 40% to 70% effective September 30, 2009 for all
OTP except cigars and little cigars. It changes tax on cigars with ring gauge of less than 30 to $0.11 per cigar in
2009, $0.12 in 2010, and $0.13 in 2011. It also Increases OTP rate on cigars with ring gauge 30 or larger from
40% to 50%.

Mississippi
Governor Barbour (R) has signed legislation to increase the excise tax rate on cigarettes by $0.50, for a total of
$0.68 per pack. The increase will go into effect on May 15, 2009.

New York
New York enacted an increase in the OTP tax rate (excluding MST) from 37% to 46%, effective April 7, 2009.

Puerto Rico
In his Economic Restructuring Plan, the Governor of Puerto Rico, Luis G. Fortuño, included a $1.00 increase
in the cigarette excise tax from $1.23 per pack to $2.23 per pack. This includes little cigars taxes at the same
rate as cigarettes. The bill was signed by the Governor on March 9, 2009 and went into effect on April 1, 2009.

Rhode Island
The FY 2009 supplemental budget, including a $1.00 cigarette tax increase to $3.46 per pack and an increase
in the OTP tax rate from 40% to 80%, passed into law on April 10. The tax increases became effective
immediately.




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                        Information provided by Altria Client Services Inc. on behalf of Philip Morris USA Inc.

				
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