Friday, November 2, 2007

Budget Q&A cont.

Q: How were tobacco products (other than cigarettes) treated under the tobacco tax increase?

A: Other tobacco products (OTP) like spit and snuff will be taxed on a weight-based system. SFW didn't support this method in the budget. We asked the legislature to tax OTP on a percentage-of-wholesale price basis.

Am I surprised that weight-based taxation made its way into the final version of the budget? Nope. Why am I not surprised? Well, the smokeless tobacco company who stands to benefit the most from this system hired 6 lobbyists in Wisconsin to work for this special treatment.

Here's what's wrong with weight-based taxation of OTP:

  • Smokeless tobacco brands can manipulate their weight vs. nicotine delivery ratios to minimize the tax on their products, thereby reducing and destabilizing the amount of revenue generated from the tax
  • By effectively reducing the prices of lighter weight (and currently best-selling) smokeless products through lower taxes, which are also the smokeless products most popular with youth, this tax change would promote even higher levels of smokeless tobacco use by kids
  • Talk about a new bureaucracy - all OTPs are not created equal - in order to be applied equitably, each different type and sub-type of tobacco product will have to have its own tax rate that takes into account its relative weight per unit of nicotine delivered - that also means that a new rate-to-weight ratio will need to be developed every time a new smokeless product comes onto the scene
The Campaign for Tobacco-Free Kids has done some excellent research on this topic. For more information, visit their factsheet on OTP taxation here.

No comments: