ATR Urges HHS Secretary Tom Price to Provide Regulatory Relief to Emerging Vapor Market
In a letter to Health and Human Services Secretary Tom Price, ATR president Grover Norquist today asked for an immediate two-year delay of pending pre-market review requirements imposed by the Food and Drug Administration's May 2016 "Deeming Rule." The Rule applies to vapor products, electronic cigarettes, and premium cigars. Absent immediate action by Congress or the Administration to roll back the FDA's new rules, more than ten thousand new businesses in the United States will be required to comply with an application process so expensive and onerous that over the next two years more than 95% of vapor product manufacturers and retail small businesses will be forced to shut down.
The C.D.C. estimates that more than 9 million U.S. adult consumers use vapor products, which are at least 95% less harmful than cigarettes, according to the Royal College of Physicians and other leading public health organizations.
Under the new rules, new smoke-free vapor products will be subject to the regulatory review process established in the 2009-passed Tobacco Control Act. From the letter:
"In 2009 when Congress passed the Family Smoking Prevention and Tobacco Control Act (TCA)... the FDA was granted authority to impose new regulations upon tobacco products such as cigarettes, smokeless and roll-your-own tobacco. A “predicate date” of February 15, 2007 was established whereby products on the market at or before this date were exempt from pre-market FDA review. That look-back period was just over two years when the TCA was signed in 2009. The look-back period for newly deemed products is ten years.
The FDA’s May 2016 Deeming Rule requires products which did not exist in 2007 – such as vapor products – to undergo the pre-market review process set up in the TCA. The process was designed to make it extraordinarily difficult to introduce new products to market, which is why it was supported by organizations like the Campaign for Tobacco-Free Kids."
There were a number of new requirements established in the FDA's May 2016 Rule.
"The most significant of the requirements imposed by the FDA’s new Deeming Rule is a requirement that all manufacturers of vapor products submit every product currently available to consumers for pre-market review, a process that every single manufacturer of cigarettes in the United State avoided when the TCA was signed into law. The Pre-Market Tobacco Application (PMTA) requires businesses to spend in excess of $300,000 per product and at least 500 hours of time per application. Even if businesses could afford this investment, the process is designed to end in failure. Many small businesses produce hundreds of these products and would be forced to close their doors as a result."
ATR is requesting a two-year delay in the PMTA filing deadline for newly deemed products.
I am asking you to delay the PMTA filing deadline by at least two years as Congress considers an alternative approach to regulating these very low risk products. There are multiple efforts with bipartisan support aimed at addressing the issues I’ve outlined, including the Cole-Bishop Amendment to the FY17 House Agriculture Appropriations Bill and House Resolution 1136, also sponsored by Congressman Tom Cole (R-Okla.). It is paramount that Congress acts this year to modernize the February 2007 predicate date for newly deemed products on the market.
The FDA is an agency of HHS and its commissioner reports to the Secretary of HHS.
With the emergence of smoke-free vapor products, millions of U.S. adults have successfully quit smoking traditional cigarettes with a variety of products that did not exist in 2007. Imposing this retroactive and onerous set of pre-market review rules upon reduced risk products is illogical and stands to harm decades of efforts to reduce the harm assocaited with cigarette use. The original Act was designed to make it extremely difficult to introduce new tobacco products, and not a single cigarette on the market today was forced to go through this review process. ATR strongly encourages HHS and the FDA to rein in this overreach with immediate action to delay all future filing and application deadlines imposed by the FDA's Deeming Rule.
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Democrat Governor Jim Justice Proposes Largest Tax Hike in West Virginia History
In his State of the State Address Wednesday night, Governor Jim Justice (D-W.V.) proposed the largest tax hike in state history, increasing the sales and gas tax and creating a new Commercial Activities Tax. These proposals stand in stark contrast to his rhetoric on the campaign trail, where he spent nearly all of 2016 promising he would not raise taxes.
To suggest that Justice lied his way into office would be quite the understatement.
The state faces a $500 million overspending problem in the 2018 fiscal year, according to an estimate from the governor’s office.
His proposal to raise the sales tax from 6 percent to 6.5 percent, when combined with a local average of an additional .2 percent would bring the West Virginia average total local sales tax to the second highest in the region, ahead of Virginia, Maryland, Pennsylvania, and Kentucky. This regressive tax increase would incentivize even more online and cross-border retail sales, a loss for small businesses that rely on competitive tax rates to keep residents in state for retail purchases.
The proposal also included eliminating the sales tax exemption for advertising and an undisclosed list of sales exemption eliminations for services, a proposal that was defeated 92-2 in 2016 by the House. If passed, this base expansion and sales tax rate hike would constitute more than $180 million in annual tax hikes.
The governor also proposed a 10 cent per gallon gas tax hike, which would bring the state gas tax burden from 33.2 cents per gallon to 43.2 cents per gallon, making it the second highest taxed in the region, behind only Pennsylvania. On top of the 18.4 cents federal excise tax, the total tax burden for a gallon of gas would rise to an astounding 61.6 cents per gallon. Such an increase would incentivize truckers and travelers to skip over the Mountain State when fueling up, on top of imposing a regressive hike on low and middle-income commuters who live in state.
The final significant tax hike proposed by Justice included the creation of a new gross receipts tax of .2 percent, representing a $214 million annual tax hike. This tax hike imposed on a business regardless of profits represents a massive step backwards in tax policy as it has long been recognized that these taxes are inefficient and cripple growth. That’s precisely why most states have eliminated these taxes, which were more popular a century ago.
One year after neighboring Kentucky imposed gross receipts tax in 2005 it was repealed when lawmakers realized the grave mistake they had made in disadvantaging some companies over others while damaging new businesses and depressing new investment. Is this Gov. Justice’s goal? To replicate the failure of Kentucky’s misguided tax that discouraged investment? Read more from the Tax Foundation here.
Additional tax and fee increases include:
- Increase in DMV license fee from $30 to $50;
- Increase in beer tax;
- Increase in wholesale markup on liquor;
In total, Justice is proposing $450 million in tax and fee hikes while suggesting a spending cut of merely $26.6 million, which constitutes a rounding error in the context of this massive proposal to increase the burden of government on West Virginia taxpayers.
Instead of taking a step back towards unworkable tax policies of the Great Depression, the legislature to embrace 21st century tax reform that has inspired growth in states like North Carolina. Broadening the base, lowering corporate, sales, and income tax rates can all be accomplished without imposing unaffordable tax hikes on Mountain State residents. The legislature would be wise to reject all of Jim Justice's tax hikes and take him at his word throughout his 2016 campaign that West Virginians "are hurting enough. We don't need to increase taxes."
The state must focus on spending restraint and reforming the tax code to inspire, not inhibit economic growth.
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New York Governor Andrew Cuomo Proposes New Vape Tax in Budget Request
In his $152.3 billion state budget proposal, Governor Andrew Cuomo (D-N.Y.) proposed a 10-cent per mL tax on the liquid contained in electronic cigarettes and vapor products. The tax would be imposed on the wholesale level and would apply both to e-liquid that contains nicotine and e-liquid that does not. According to state revenue estimates, the tax would generate $3 million annually.
This reckless tax hike proposal flies in the face of conclusive evidence that vapor products are effective smoking cessation tools that represent no greater than 5 percent of the harms to consumers as traditional combustible tobacco cigarettes. Balancing the state budget on the backs of smokers looking to quit flies in the face of decades of efforts aimed at curbing cigarette use to drive down public health costs.
Currently, six states impose an excise tax on vapor products including North Carolina (5 cents per mL), Louisiana (5 cents per mL), Kansas (20 cents per mL), West Virginia (7.5 cents per mL), Pennsylvania (40% wholesale), and Minnesota (95% wholesale). Beginning April 1, California will also impose a 27.3% wholesale tax on vapor products.
Earlier this month I outlined the possible relationship between state overspending problems like New York's and possible tax threats to vapor products in the states. That map can be found below and the original piece can be read here. Click the map to enlarge.
Though only a small portion of Cuomo’s large tax hike plans (including an extension of the nearly 9% “temporary” tax surcharge on income over $1 million), the tax on vapor products is among the most punitive. It not only targets smokers, who are some of the most heavily taxed consumers in the United States, but it targets former smokers who have found vapor products as a successful means of quitting smoking. Similar to other nicotine replacement therapies (NRTs), vapor products should remain taxed at the sales tax rate exclusively.
The state’s declining revenue collections from cigarettes may play a role in the increased interest from the governor in taxing vapers. During the current fiscal year, tobacco products generated about $1.3 billion for the state, a figure projected to decrease to roughly $1.2 billion this year and even further in future years. At $4.35 per pack, New York’s state cigarette tax is the highest in that nation. Residents of the Big Apple are hit with another local tax that brings smokes bought there to a per pack tax rate of $5.85.
This high cigarette tax rate has led to the highest rate of cigarette smuggling in the nation. According to an analysis conducted by the nonpartisan Tax Foundation and Mackinac Center for Public Policy, 55.4 percent of cigarettes consumed in the state are smuggled in, which helps consumers avoid paying taxes on the products.
Unlike cigarettes, consumers can purchase vapor products online where taxes are not collected or imposed by the government. This will result in the closing of vape shops across the Empire State, a loss in sales, income, and excise tax revenue, and will harm those seeking a brick and mortar experience in their quit journey.
The legislature should reject this senseless cash grab and focus on spending restraint instead.
Want to keep up to date with news like this? Subscribe to my newsletter, "Vapor News and Views," by clicking here.
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State Overspending May Be A Significant Problem for Vapers in 2017
As the 2017 legislative session kicks off in states across the country, three-fifths of states face overspending problems that will force serious discussions about currently collected tax revenue and future spending levels. More commonly but incorrectly referred to as budget shortfalls, states across the country face a conflict between anticipated revenue levels and out of control budget growth. It should come as no surprise to consumers of vapor products that this presents the threat of new product taxation in states where sin taxes have not yet been imposed.
Electronic cigarettes and vapor products are used by millions of consumers in the United States as a means to quit smoking combustible, or traditional cigarettes. The mounting evidence suggests that these smoking cessation products are at least 95 percent less harmful than cigarettes. That, however, hasn’t deterred lawmakers from targeting the growing multi-billion dollar industry and its consumers with tax hikes.
By sheer number of threats in recent years, vapor products have been the number one targets for tax hikes of any product or type of tax imposed by states, including cigarettes. And while lawmakers have succeeded at raising or phasing in more increases in state cigarette taxes (15 times since 2013), the imposition of entirely new sin taxes on vapor products in 6 states (plus once by voters) is a trend we at ATR will continue to monitor.
In each of the seven states that will impose an excise tax on vapor products in 2017, six came about as part of a tax package between 2012 and 2016 that also increased the state cigarette tax rate. The trend of considering tax increases on both products at the same time mirrors a national problem the vapor industry and its consumers face; the incorrect perception that the products are similar because vaping looks like smoking and thus a natural extension of a cigarette tax hike is an e-cigarette tax hike as well.
Until the emergence of vapor products, cigarettes were the number one targets of tax hikes in the states. Between 2000 and 2016, 48 states and the District of Columbia passed 135 state cigarette tax increases, five times the number of tax hikes passed on liquor.
Below is a summary of legislative tax changes imposed last year alone. As you can see, state tobacco tax hikes represent the second largest type of tax hike from FY17.
Cigarettes are a popular scapegoat for overspending and shortfalls because the taxes can bring in somewhat significant revenue quickly without much opposition from consumers, even if it the money may be short-lived, cause budget volatility, lead to black markets, and punitively punish the poor. Regardless, cigarettes remain a top target for tax-hungry politicians.
In an era (post-2010 GOP gains across the country) of opposition to broad-based tax increases (a win for most taxpayers), sin taxes are an easy target for politicians in tough economic times who wish to raise as much money as possible from as few voters opposed. Though misguided, it’s the reality. As such, with more than half of U.S. states facing overspending problems (shortfalls), 2017 may be a tough year for lawmakers, “sinful” product consumers, and small businesses across numerous industries.
To preview the states where new vapor product taxes may be a real risk, I’ve compared the states with budget shortfalls (MultiState rundown here) to those that have passed a cigarette tax increase in recent years. In most cases, states that have passed a cigarette tax in the last four years are unlikely to do so again this year and new standalone vapor taxes will be rare, though possible.
Overspending problems aren’t the only things that cause tax hikes; some politicians are simply addicted to your money. As such, I’ve also included a number of states where budget discussions and the political climate lend itself to a real threat that a vapor product tax may be sent to the governor’s desk regardless of a stable budget outlook.
States with a defined overspending problem in 2017 where cigarette taxes have not been raised in the last four years (2012-2016), and the projected budget gap:
- Alaska: $4 billion;
- Colorado: $119 million;
- Delaware: $350 million;
- Illinois: greater than $10 billion;
- Indiana: $378 million;
- Iowa: $132 million;
- Maryland: greater than $175 million;
- Missouri: greater than $200 million;
- Nebraska: nearly $1 billion;
- New Mexico: $69 million;
- New York: $689 million;
- North Dakota: $310 million;
- Oklahoma: $868 million;
- Virginia: $861 million;
- Washington: $474 million;
- Wisconsin: $693 million;
- Wyoming: $156 million.
States with an undefined but possible shortfall and no recent cigarette tax hike:
- Montana – governor has already called for a tobacco tax hike;
- South Dakota;
- Texas: lackluster forecast.
States with a budget shortfall, cigarette tax hike in last four years, and possible vapor tax:
- Alabama: greater than $40 million;
- Connecticut: greater than $1.3 billion;
- Massachusetts: nearly $300 million;
- Oregon: $1.7 billion;
- Rhode Island: $112 million;
- Vermont: greater than $40 million.
States without a budget shortfall but possible vapor tax:
- Ohio – vapor tax proposed by current governor in prior years;
- Hawaii – the state with more tobacco bills annually than anywhere else.
States without a shortfall or reason to believe there will be a successful effort to impose a vapor tax in 2017 include Arizona, Arkansas, Florida, Georgia, Idaho, Kentucky, Maine, Michigan, Nevada, New Hampshire, New Jersey, South Carolina, Tennessee, Utah.
Summary, in case you skipped to the bottom: A lot of states have overspent tax dollars in recent years, quickly forgetting (or neglecting) the impact of slow recession-era growth on budgets and state governments. Unfortunately for consumers, targeted excise taxes on products like cigarettes and a misconception that vaping is smoking by another name has put consumers of life-saving products like electronic cigarettes in the crosshairs of the ever-present threat of tax increases at the state level.
Americans for Tax Reform opposes all tax increases as a matter of principle and will continue to monitor and fight efforts to subject life-saving products like vapor products to new and higher taxes.
Publisher's note: The assessments made in this post are based predominantly on the fiscal conditions of states in 2017. It is quite possible that additional states, like Utah and Nevada, will consider proposals to tax vapor products despite a nonexistent need to balance the state budget beyond projected tax collections and spending rates. It is also possible that states labeled possible threats will not consider excise taxes on vapor products as smarter alternatives such as spending restraint is considered instead. This map and post simply serves as a suggestion that where tax hikes are considered, history can be a strong but not guaranteed indicator of future outcomes.
If you’re interested in more information on 2017 state budget conditions, read the National Association of State Budget Officers most recent “Fiscal Survey of States.”
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Out of Touch Oregon Governor Kate Brown Proposes Bevy of Tax Hikes in Her First Budget
In her first-ever proposed budget, Oregon Governor Kate Brown has called for hundreds of millions of dollars in higher taxes and spending over the next two years. This comes on the heels of the announcement that the state faces a $1.7 billion overspending problem and a rejection by voters of a union-pushed ballot measure in November that would have raised taxes by $3 billion per year on Oregon businesses.
Brown’s tax hikes include:
- Elimination of “Partnership Pass-through,” which allows for lower tax rates for S-corps as well as the IC-DISC dividend subtraction. This is personal income tax hike of more than $183 million.
- Restructuring the Hospital Assessment tax. Currently, hospitals pay the state a portion of patient revenue to garnet matching federal dollars and get the money back after the money comes in from D.C. Turning the assessment into a higher “true tax” would raise taxes by $379 million (and game the system further).
- Reinstating the recently expired insurance and managed care tax: $151 million;
- Increase in cigarette tax of 85 cents per pack from $1.33 per pack to $2.18 per pack: $21.5 million;
- Other Tobacco Products tax hikes across the board (from 65% to 75%) and specifically on products like cigars (+0.50/cigar) and moist snuff (+$0.89/oz): $13.7 million;
- Liquor tax hike of 50 cents per bottle and a 100% increase in liquor licensing fees: $39 million;
Oregon taxpayers have an important protection from politicians like Gov. Kate Brown, with a supermajority requirement in the legislature to raise taxes. Three-fifths of legislators in both chambers must vote to raise taxes for passage, meaning Brown will need the support of both Democrats and Republicans to get her way.
“Until we are willing to … address the root of our budget problems, we will continue to experience the same kind of budget challenges we are facing today.”
The root cause? Overspending.
Oregon’s general fund and lottery revenues are expected to increase by more than $1.3 billion over the next two years. But even that isn’t enough to keep up with the out of control rate of spending in the state. What are among the main drivers of spending growth over the next two years, according to the Governor herself?
- Obamacare’s misguided Medicaid expansion: nearly $1 billion;
- Increased public education spending: $781 million;
- Public pension payments: $354 million.
Each of these cost-drivers are best addressed through reforms that have been implemented successfully elsewhere, as opposed to the “Oregon Way” of throwing money at everything and hoping no one asks questions about outcomes. This budget represents a 9 percent increase in spending, more than three times population growth and inflation.
The failure of labor unions in November to convince voters to approve a 2.5 percent gross receipts tax on Oregon businesses, which would have made it the most burdensome and highest tax in the nation, has forced an important debate in the state. Without the billions of dollars Measure 97 would have taken from consumers and businesses alike, the state must now address the underlying problem in Salem: overspending.
Gov. Brown, who supported the Measure 97 tax hike, clearly didn't get the November memo that taxpayers aren't interested in raising taxes; they prefer spending restraint instead. The legislature should heed the will of voters though, buy rejecting Gov. Brown's tax hikes when they return for session next year.
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ATRF Poll Shows Overwhelming Bipartisan Support for Creation of Mid-Level Dental Providers
In a poll conducted for the American for Tax Reform Foundation by Wilson Perkins Allen Opinion Research, likely voters overwhelmingly support a new and innovative solution to America’s dentist shortage. In what has been called a “big idea” for social change, a new type of mid-level dental practitioners has emerged as a possible way to reduce health care costs while increasing access to care for millions of Americans seeking dental services throughout the United States.
Like dental hygienists, “dental therapists” or “dental hygiene practitioners” work under the supervision of dentists with collaborative agreements that allow them to provide an expanded list of services to patients. Governor Paul LePage (R-Maine) and former Governor Tim Pawlenty (R-Minn.) were the first to sign legislation permitting the creation of these mid-level practitioners in their states.
Conducted at the end of June, the ATRF poll found that 79% of likely voters support the creation of mid-level providers that could perform dental care services such as basic extractions and hygiene plans.
In analyzing the results, WPA Opinion Research concluded,
“This support extends across all key demographic groups including men and women of all ages, Republicans, Independents, Democrats, white, and Hispanic voters. The support for such a process extends across a wide swath of Americans, regardless of political affiliation, ethnicity or gender.
77% of Republicans, 80% of Independents, and 80% of Democrats support the process of creating these new positions, which takes an act of the legislature in most cases. Additionally, 58% of voters strongly support this position, “illustrating that the support is not just casual and implementing this process would be welcomed by voters across the country.”
In an article for the Wall Street Journal titled, “You Don’t Need to Be a Dentist to Fill a Cavity,” Reason.com reporter Eric Boehm recently explained the issue and some of it’s misguided opponents:
“Other states are considering dental therapy, but professional associations of dentists stand opposed. Take Michigan, where state Sen. Mike Shirkey introduced a dental therapy bill in June. Shortly thereafter, the Michigan Dental Association urged its members to oppose the bill. The association says that Michigan already has 7,500 dentists and 10,300 hygienists, which it insists should be enough to cover the state’s needs.”
In an interview with Wendell Potter at the Huffington Post, ATR president Grover Norquist went further in explaining ATR’s interest in this issue:
“When I asked Norquist recently why he has gotten involved in the fight to expand the dental workforce to include mid-levels—often called dental therapists—he told me it’s because, in his view, opponents are engaging in tactics to preserve a profitable status quo at the expense of millions of Americans. To him, this smacks of “crony capitalism” in which businesses and professionals exert influence on government officials, usually through campaign contributions and lobbyists, to get favorable treatment.”
Of the opportunities these new mid-level dental practitioner positions present, Grover went on to note:
“It’s going to have significant pay off, not only for people trying to move ahead in their careers and for consumers who need dental care” but also for dentists, who, Norquist notes, will be able to spend more time doing more complex, higher end procedures."
While the states have grappled with implementing a wide range of federal health care mandates, questions about rising costs the next steps in health care reform have lingered in Washington. Fortunately, states don't have to wait to act. Efforts to expand the scope of practice for dental hygienists with this new position do present great promise for qualified dental professionals and the millions of Americans interested in taking advantage of the services they can provide.
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ATR Opposes Oroho-Sarlo Gas Tax Hike in New Jersey
Proponents of big and unreformed government in the Garden State are demanding hundreds of millions of dollars in tax hikes as part of a proposal to fund the now-broke Transportation Trust Fund (TFF). The New Jersey State Senate was scheduled to hold its first series of votes in over a month today, including a vote on a proposal being pushed by Senators Steve Oroho (R-Sussex) Paul Sarlo (D-Bergen), which would raise the gas tax by 23-cents per gallon.
This effort comes on the heels of an Assembly-passed plan, backed by Governor Chris Christie (R-N.J.), which would have raised the gas tax but been paired with a greater net tax reduction of the state sales tax. That plan would have reduced the state sales tax from 7 to 6 percent.
In the current fiscal year, the Oroho-Sarlo tax plan represents a $760 million tax increase. Over ten years, this plan would result in between $3.9 and $4.5 billion in tax increases, assuming a phase-in of several tax cuts, including the estate tax repeal and an increase in tax exemptions for pension income.
For lawmakers who have signed it, voting for the Oroho-Sarlo tax plan would clearly constitute a violation of the Taxpayer Protection Pledge.
Elements of the Oroho –Sarlo plan include:
Estate Tax Phase-Out
- An immediate increase in the exemption of estate tax income, to $2 million;
- An phased-in increase in the exemption of the estate tax income to the federal level of $5.45 million in 2 years;
- An planned repeal of the estate tax entirely in the years following
- If fully phased-in, this tax reduction would equal a $4.2 billion net tax cut over 10 years.
Exemption of Pension & Retirement Income from State Income Taxes
- Five-year phase-in of an increase in the state exemption for pension and retirement income taxes from $100,000 to $150,000 annually;
- If phased-in this tax reduction would result in $1 billion-$1.4 billion net tax cuts over 10 years.
Increase in Earned-Income Tax Credit
- An increase in the Earned-Income Tax Credit (EITC) to 40% of the federal level.
Significant Increase in State Gas Tax
- A 23-cent gas tax increase, which would bring the state gas tax to 37.5 cents-per-gallon;
- This gas tax hike would make gas sold in New Jersey roughly the 7th highest taxed in the nation, and would rise with higher gas prices;
- When implemented, this tax hike would result in an immediate $850 million gas tax hike, increasing to over $1 billion in new and higher taxes in annually and in perpetuity;
- Tax hike breaks down as follows: 7% Petroleum Products Gross Receipts Tax, 10-cent-per-gallon PPGRT tax on motor fuel, and a 3-cent-per-gallon PPGRT diesel surcharge imposed at the wholesale level.
Americans for Tax Reform opposes the Oroho-Sarlo transportation tax hike and urges the legislature to consider reforms that drive down the cost of building and maintaining transportation infrastructure while working to protect taxpayers from further job-killing anti-competitive tax hikes like this.
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Garden State Lawmakers On Verge of Passing Massive Gas Tax Hike
A bill to immediately raise the gas tax by 23 cents per gallon could be brought to the floors of the New Jersey state Senate and Assembly as early as this week, after passing out of their respective Budget committees last Thursday. Sponsored by Senators Steve Oroho (R-Sussex) and Paul Sarlo (D-Bergen), the bill (Senate Bill S2412) would raise the net tax burden on New Jersey residents by more than $500 million annually.
The Bad: Gas Tax Hikes.
- The plan would immediately raise the state gas tax from 14.5 cents per gallon by 23-cents to 37 cents per gallon, making it roughly the 7th highest in the nation. This 23 cents is calculated based on a new 12.5 percent sales tax imposed up on the current average price of gasoline. The tax would rise with higher gas prices.
- The current 14.5-cent gas tax is made up of a 10.5-cent per gallon tax on motor fuels and a 4-cent Petroleum Products Gross Receipts tax.
- Not all of the currently collected gas tax revenue goes to the Transportation Trust Fund (TFF), which runs out of money on July 1.
- The current gas tax is projected to raise $750 million this year and a 23-cent increase would add another $1.4 billion to state coffers per year.
The Illegal: Diverting Airport Revenue to Roads and Bridges.
- There is a provision of this legislation, which raises the effective excise tax rate imposed on jet fuel 25-fold.
- The New Jersey jet fuel tax is currently applied to gallons of fuel used on taxiing and takeoff (the burn-rate method), resulting in an effective tax rate of .4 cents per gallon.
- This proposal would raise that tax to 10-cents per gallon, a 25-fold increase.
- Mandating that any of this money be diverted to roads, highways, bridges or any other non-aviation purpose would violate Federal law prohibiting the diversion of airport revenue. Read more on that here.
- A plaintiff against the state would likely win this lawsuit, resulting in a $170 million loss of anticipated revenue immediately after this tax hike passes.
The Good. Death Tax Phase-Out and Other Cuts.
- The legislation begins the phase-out the estate tax over three years, a $540 million per year tax cut once fully implemented.
- Residents filing jointly will not have to pay income taxes on retirement income, including pensions, up to $100,000, up from $20,000.
- Creates a new tax deduction for charitable giving.
- Voters will be asked this fall to constitutionally dedicate existing and future gas tax revenue to transportation.
If fully phased in, the total tax cuts being considered equal about $850 million per year compared to $1.4 billion in gas tax hikes.
This legislation does nothing to address the cost-drivers and structural issues within the Transportation Trust Fund. If proponents of a gas tax hike are serious about the Garden State’s real transportation needs, they will re-examine the rampant waste within the system and the types of public projects funded by the state.
Instead of requiring commuters to fork over more of their hard-earned income, New Jersey lawmakers should modernize the state’s prevailing wage laws, re-examine union contracts, and introduce real competition into the bidding and contract process for transportation projects. Until then, tax hikes should be a non-starter for negotiations about short or long-term transportation needs.
Americans for Tax Reform opposes this legislation and urges the legislature to reject Senators Sarlo and Oroho’s shameless gas tax cash grab.
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ATR Launches Campaign to Defeat Vapor Products Tax Hike in Pennsylvania
On the heels of a July 1 deadline for the FY 2016-2016 budget, legislative leaders and Governor Tom Wolf (D-Pa.) are in the final stretch on deciding the size of the annual budget and whether tax hikes will be an element of the deal. Unlike last year, broad based tax increases including the sales and income tax seem to be off the table. Unfortunately, the target of money-hungry lawmakers seems to be smokers, vapers, and gamblers.
In response to these targets for tax hikes, ATR has again launched a campaign to defeat any and all efforts to raise taxes, with a specific focus on the proposal to impose a massive and new 40% wholesale tax on tobacco-free vapor products.
The first set of lawmakers’ constituents who will receive phone calls urging them contact their lawmaker to tell them to reject taxes hikes on products that are helping smokers quit includes:
- House Speaker Mike Turzai (HD-28)
- House Majority Leader Dave Reed (HD62)
- Senate Majority Leader Jake Corman (SD34)
A sample script can be read here:
Hi, this is Linda Adams with an important message about a pending tax increase in Pennsylvania. This call was paid for by Americans for Tax Reform at 202-785-0266. Republicans are on the verge of passing a massive new tax hike on small businesses that are helping smokers quit. This will hurt public health and kill jobs. Press 1 on your phone now to connect to your state Senator Jake Corman to tell him to reject tax hikes. Press 1 now.
The increasing body of scientific evidence suggests that vapor products are between 95 and 99 percent less harmful than combustible cigarettes and are being used by smokers as smoking cessation products. To target with tax hikes a product that helps smokers quit works at cross purposes with decades of efforts to curb the use of cigarettes and makes for horrible tax and public health policy.
ATR will be closely monitoring this debate and urges lawmakers to rein in out-of-control spending instead of soaking consumers and businesses with unaffordable tax hikes. Additional legislative districts may be added to this campaign in the coming days.
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West Virginia Legislature Passes Massive New Tax on Vapor Products
In a Special Budget Session, the West Virginia House of Delegates and state Senate voted to subject electronic cigarettes and vapor products to a new, onerous excise tax. By a vote of 63-45, the House voted to adopt a Senate proposal that is expected to yield $98 million in new revenue for the state over the next year.
Senate Bill 1012, which passed in the Senate over the weekend and the House today, included both a $.65 per pack cigarette tax hike and a new 7.5 cents per mL e-liquid tax. The latter element of the packages makes West Virginia only the 5th state in the nation to subject vapor products to a sin tax.
Americans for Tax Reform expressed its opposition to these tax hikes in a letter to the legislature, which can be read here.
We summarized the dangers in increasing the reliance on tobacco taxes by explaining,
“Targeted excise taxes have proven to be unstable sources of revenue, and ultimately can cause a reduction in tax receipts…In fact, only three out of the 32 state tobacco tax increases, enacted between 2009 and 2013, have met or exceeded tax revenue projects.”
This is largely due to black market smuggling, cross-border sales, and the seeking out of lower cost products in cheaper markets. All of these acts result in greater burdens on low-income consumers and to the detriment of in-state small businesses like convenience stores.
The greater affront to public health, however, came in the form of the new tax on electronic cigarettes and vapor products, which will now be taxed at a rate of 7.5 cents per mL of e-liquid.
“These tobacco-free technology products are helping tens of thousands of smokers make the transition to far healthier alternatives. By imposing a 7.5-cent per mL tax on e-cigarettes…this punitive tax is both anti-health and a shameless cash grab…It is reckless to destroy with tax hikes small businesses accomplishing what tax hikes on cigarettes never could, getting people to quit smoking.”
Vapor products are between 95 and 99 percent less harmful than combustible cigarettes and tax hikes clearly work against efforts to reduce the harm associated with smoking.
The House of Delegates rejected an amendment by Delegate Larry Faircloth that would have removed e-cigarettes and vapor products from Senate Bill 1012’s tax hikes. This new tax makes West Virginia the state with the 3rd highest tax rate on the products in the nation.
It should also be noted that with passage of this bill, "No wholesaler or other person may purchase e-cigarette liquids from any seller not approved by the Tax Commission," setting up a requirement for any company who sells products into WV to first be approved by the state to do so, beginning on July 1st.
Instead of reining in spending, the legislature has imposed a senseless cash grab on consumers of smoking cessation products while increasing the state’s dependence on a volatile revenue source. As the legislature prepares for next year's budget debate, it should consider repealing these tax hikes as part of a broader effort on tax reform.