LOC News
State Tobacco Tax Increase and New Vaping Tax Bill Advances with Preemption
A tobacco tax bill requested by Governor Kate Brown advanced this week. The amended HB 2270 would now be a legislative referral to the voters at the November 2020 general election for approval or rejection. If approved, beginning on January 1, 2021, cigarette taxes would increase by $2 per pack, a new wholesale tax of 65% (same rate as other tobacco products) would be imposed on vaping devices and products, and the cap on cigar taxes (also taxed at 65% of wholesale price) would be increased from 50 cents per cigar to $1 per cigar.
HB 2270 would dedicate ALL of these new tax revenues (estimated at $350 million for the 2021-23 biennium) to the state’s medical assistance program (90% dedication) and various prevention and cessation of tobacco and nicotine programs (10% dedication). Mental health funding is an LOC priority, and passage would improve such funding as mental health is included in the state’s medical assistance program.
However, the LOC is disappointed with the bill for two reasons. First, cities would receive no share of these new taxes in their state shared revenue allotments. Cities presently receive approximately 2% of state cigarette taxes with the existing $1.33 per pack tax and asked to receive at least the same share with the tax increase. Cities’ share has been declining each year.
Second, the joint committee amended the bill and imposed a new preemption on local governments, providing that they may NOT impose a tax on inhalant delivery systems (which includes the device used to vape as well as the substance that is vaped). Traditionally, when tax preemptions have occurred there has been a sharing of revenue in exchange. The LOC had advocated against the preemption and the preemption had been removed in the House Revenue Committee last week, but then was amended back into the bill this week in the Joint Committee on Tax Expenditures. There was no explanation or testimony provided in favor of imposing this preemption on local governments. The bill passed the House this week.
Contact: Wendy Johnson, Intergovernmental Relations Associate – wjohnson@orcities.org
Last Updated 6-21-19