Report Title:

Cigarette Tax; Increase

Description:

Increases tax per cigarette to $ , $ , and $ on 9/30/2005, 6/30/2006, and 6/30/2007, respectively (amounting to $ , $ , and $ per pack of 20 cigarettes). Earmarks    %,    %, and    % of tax for general fund, DOH health promotion programs, and smoking cessation programs, respectively.

HOUSE OF REPRESENTATIVES

H.B. NO.

1049

TWENTY-THIRD LEGISLATURE, 2005

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

relating to cigarette tax.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. The legislature finds that smoking is the largest cause of morbidity and mortality in the nation that can be easily prevented. Beyond harming individual health, use of tobacco in the United States costs about $7.18 for each pack of cigarettes sold in terms of health care expenses and decreased worker productivity. In Hawaii, this amounts to $526,000,000 in health care expenses and productivity losses.

Smoking is also associated with heart disease, cancer, stroke, emphysema, bronchitis, low birth-weight babies, sudden infant death syndrome, increased frequency of colds and ear infections, and asthma in the household. Asthma is the largest single cause of school absenteeism in the State.

The legislature further finds that increasing the tax on cigarettes is the most effective way to prevent young people from becoming daily smokers. It has been estimated that a ten per cent increase in the price of cigarettes decreases the number of youngsters who start smoking by three to seven per cent in the long-term. The estimated decrease for adults is three per cent. Hawaii was once amongst the nation's leaders in cigarette taxes. However, as of January 2005, the State ranks only tenth in the nation in imposing $1.40 in tax per pack of cigarettes ($0.07 per cigarette in a twenty-cigarette pack). Rhode Island ranks first with $2.46 per pack, New Jersey ranks second with $2.40 per pack, Michigan ranks third at $2.00, Montana is fourth with $1.70, and Alaska is fifth at $1.60 per pack. Tobacco taxes can be viewed as a user tax affecting the 17.3 per cent of Hawaii adults who are smokers who do not pay the full societal costs of their use of tobacco.

The purpose of this Act is to discourage smoking, especially by young people, by increasing the tax on cigarettes.

SECTION 2. Section 328L-4, Hawaii Revised Statutes, is amended to read as follows:

"[[]§328L-4[]] Use of funds appropriated to the department. The department, immediately upon receipt of the thirty-five per cent of moneys appropriated pursuant to section 328L-2(b)(2) shall:

(1) Transfer up to ten per cent of the total moneys received by the State from tobacco settlement moneys to the department of human services for the children's health insurance program; and

(2) Expend the remainder of the moneys received by the department and the cigarette tax revenues earmarked under section 245-3(a) for health promotion and disease prevention programs, including but not limited to, maternal child health and child development programs, promotion of healthy lifestyles (including fitness, nutrition, and tobacco control), and prevention oriented public health programs.

For purposes of paragraph (2), the director shall convene an advisory group that shall be separate from the tobacco prevention and control advisory board, to strategically plan the development and implementation of preventive systems to achieve measurable outcomes and to make recommendations for the expenditure of these moneys. The advisory group shall be composed of nine members with expertise in the programs under paragraph (2), and shall be selected at the discretion of the director."

SECTION 3. Section 328L-5, Hawaii Revised Statutes, is amended by amending subsections (d) and (e) to read as follows:

"(d) The Hawaii tobacco prevention and control trust fund may receive appropriations, contributions, grants, endowments, cigarette tax revenues pursuant to section 245-3(a), or gifts in cash or otherwise from any source, including the State, corporations or other businesses, foundations, government, individuals, and other interested parties; provided that any appropriations made by the State shall not supplant or diminish the funding of existing tobacco prevention and control programs or any health related programs funded in whole or in part by the State.

(e) The assets of the Hawaii tobacco prevention and control trust fund shall consist of:

(1) Moneys appropriated under section 328L-2(b)(3);

(2) Moneys appropriated to the Hawaii tobacco prevention and control trust fund by the state, including cigarette tax revenues earmarked under section 245-3(a), or by the county, or by the federal government;

(3) Private contributions of cash or property; and

(4) Income and capital gains earned by the trust fund."

SECTION 4. Section 245-3, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) Every wholesaler or dealer, in addition to any other taxes provided by law, shall pay for the privilege of conducting business and other activities in the State:

(1) An excise tax equal to [5.00]     cents for each cigarette sold, used, or, possessed by a wholesaler or dealer after [June 30, 1998,] September 20, 2005, whether or not sold at wholesale, or if not sold then at the same rate upon the use by the wholesaler or dealer;

(2) An excise tax equal to [6.00]     cents for each cigarette sold, used, or possessed by a wholesaler or dealer after [September 30, 2002,] June 30, 2006, whether or not sold at wholesale, or if not sold then at the same rate upon the use by the wholesaler or dealer;

(3) An excise tax equal to [6.50]     cents for each cigarette sold, used, or possessed by a wholesaler or dealer after June 30, [2003,] 2007, whether or not sold at wholesale, or if not sold then at the same rate upon the use by the wholesaler or dealer; and

[(4) An excise tax equal to 7.00 cents for each cigarette sold, used, or possessed by a wholesaler or dealer after June 30, 2004, whether or not sold at wholesale, or if not sold then at the same rate upon the use by the wholesaler or dealer; and

[(5)] (4) An excise tax equal to forty per cent of the wholesale price of each article or item of tobacco products sold by the wholesaler or dealer, whether or not sold at wholesale, or if not sold then at the same rate upon the use by the wholesaler or dealer[.];

provided that        per cent of the tax imposed in this subsection shall be paid into the general fund,        per cent of the tax imposed in this subsection shall be paid to the department of health for health promotion and disease prevention programs under section 328L-4(2), and        per cent shall be paid into the Hawaii tobacco prevention and control trust fund under section 328L-5. Where the tax imposed has been paid on cigarettes or tobacco products that thereafter become the subject of a casualty loss deduction allowable under chapter 235, the tax paid shall be refunded or credited to the account of the wholesaler or dealer. The tax shall be applied to cigarettes through the use of stamps."

SECTION 5. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 6. This Act shall take effect upon approval.

INTRODUCED BY:

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