Oregon May Increase Taxes on Tobacco and Impose a New Tax E-Cigarettes
Do you support or oppose Oregon's proposal to increase taxes on tobacco and impose a new tax on e-cigarettes?
by The 2020 Causes Voter Center | 10.19.20
What the Initiative Does
This legislatively referred state statute, known as Oregon Measure 108, would increase taxes on distributors of tobacco products and other nicotine delivery systems such as e-cigarettes. Taxes would increase at the following rates:
- Cigarettes: 16.65 cents a cigarette (an increase from $1.33 to $3.33 per 20-pack of cigarettes)
- E-cigarettes and other nicotine inhalants: 65% of the wholesale sales price (an increase from no tax at present), with products that have been FDA-approved to help people quit smoking and e-cigarettes sold for the purpose of vaporing marijuana exempted from the tax
- Cigars: a tax cap at 65% of the wholesale sales price, not to exceed $1 per cigar (an increase from a previous maximum tax of $0.50 per cigar)
These rates would raise Oregon’s tobacco tax rate from 32nd highest in the U.S. to sixth-highest.
Revenues from these taxes would first be dedicated to the administration and enforcement of the tax. After that, 90% of the remaining revenues would be directed to the Oregon Health Authority for medical and healthcare assistance programs, including mental health services. The other 10% would go to tribal health providers, including the Urban Indian Health Program, and other programs addressing tobacco and nicotine health issues.
Should Measure 108 pass, the taxes under it would apply beginning on January 1, 2021.
Argument in Favor
Raising tax rates on cigarettes, tobacco products and nicotine products will yield twofold benefits for Oregonians. From a revenue perspective, these increased taxes will help Oregon fund important health programs such as the Oregon Health Plan and smoking prevention programs. From a public health perspective, increasing the costs of cigarettes, tobacco products and nicotine products will help make these products less accessible to youth, who are at high risk of lifelong addiction if they start using these products at young ages.
Taxes on cigarettes, tobacco and nicotine products are regressive, often harming low-income users of these products. They can also harm small businesses that sell these products, which is something that small businesses can ill-afford during the COVID-19 pandemic. Additionally, “sin taxes” are a poor revenue generator, as income from such taxes generally declines as people give up or reduce the activity, thereby leading to reduced revenue.
Measure 108 is supported by numerous health advocacy organizations, including the American Heart Association, American Lung Association, Oregon Nurses Association and Kaiser Permanente. The Oregon Association of Hospitals and Health Systems (OAHHS), which also supports Measure 108, says:
“Smoking is the number one preventable cause of death in Oregon. Each year, nearly 8,000 Oregonians die from tobacco related illnesses, but that doesn’t stop Big Tobacco from targeting kids with candy-flavored vapes. In fact, one out of four high schoolers in Oregon report vaping and research shows young people who vape are three times more likely to start smoking. Oregonians pay almost $1.5 billion annually in smoking-related health care costs while Big Tobacco profits. But Oregon doesn’t tax vapes a single penny to cover the costs. And evidence shows that when states tax vaping and tobacco products, more people quit, and fewer are likely to start. Measure 108 on November’s ballot helps reduce and prevent youth smoking, saves lives, and funds health care and education efforts. While Oregon battles COVID-19, there has never been a more important time to take action to reduce smoking and vaping.”
OAHHS contends that passing Measure 108 would:
- Prevent nearly 12,000 premature deaths;
- Prevent over 19,000 Oregon youth from becoming smokers; and
- Fund the Oregon Health Plan and smoking prevention programs to help people quit cigarettes and tobacco products.
Oregon Gov. Kate Brown (D) supports Measure 108. She says:
“[Measure 108] will not only save lives and improve health by helping people quit smoking, it will ensure Oregonians can continue to access the health care they need to thrive.”
Taxpayers Association of Oregon opposes Measure 108. It warns that a tax increase on cigarettes, tobacco and nicotine products would hurt low-income Oregonians, who are more likely to smoke. This view is shared by The Tax Foundation, which says that Measure 108 as currently designed is regressive. While he agrees with this assessment, Paul Stewart, CEO of Sky Lakes Medical Center in Klamath Falls, contends that it would be beneficial to discourage smoking by low-income persons through higher taxes:
“This is not a wise use of anyone’s funds, let alone those who are low income, and if it (a higher tax rate) helps some of them stop, I think that’s the right thing to do.”
It also contends that Measure 108 would disproportionately hurt the small local shops that sell tobacco products — a consequence that may be particularly devastating to these businesses in the midst of the COVID-19 pandemic. This view is shared by Rick Mauro, owner of Rick’s Smoke Shop stores in Klamath Falls, who opposes Measure 108. Mauro estimates that the cigarette tax alone would cost his three stores $20,000 in revenue.
Opponents of Measure 108 also warn that revenue from “sin taxes” such as Measure 108’s are unstable. Although these taxes tend to generate more revenue at the outset, their income gradually decreases over time as people give up the highly taxed activity.
Summary by Lorelei Yang
(Photo Credit: iStockphoto.com / mifid)
- Oregon Association of Hospitals and Health Systems (In Favor)
- Tax Foundation (Opposed)
- Herald and News
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