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March 15, 2012
TOPEKA A Senate committee heard testimony today on a bill that would raise tax rates on most tobacco products other than cigarettes.
Senate Bill 462 would raise the tax on nearly all non-cigarette tobacco products from 10 to 30 percent of wholesale price, and would make the tax on "little cigars" the same as cigarettes — 79 cents per pack. Little cigars are essentially a cigarette but with a wrapping made of tobacco instead of paper.
The bill's sponsor — Sen. Roger Reitz, a Manhattan Republican and physician — told fellow members of the Federal and State Affairs Committee that the measure wasn't meant to increase state tax revenue but to improve the health of Kansans.
"All of us pay more for people who are tobacco users," Reitz said. "The bladder cancers, lung cancers, stroke potential, heart attack potential — all of those things cost us a fortune in insurance and health care costs."
He said the measure was particularly aimed at discouraging oral tobacco use by youth.
Currently non-cigarette products — such as chew, cigars, and newer products such as Snus, Orbs, Strips and toothpicks — are taxed at a lower rate than cigarettes.
"This differential tax rate can have the effect of encouraging young people to use other tobacco products," Reitz said. "It has been shown that increased prices for tobacco are a mitigating factor for its use."
Among those testifying against the bill was Whitney Damron, representing cigar maker Swisher International.
"The testimony you've heard (about) people gravitating toward a smokeless type product is because of what you've done here in this Legislature. You've precluded citizens who have the right to consume tobacco products from enjoying that in public," Damron said, referrring to the statewide smoking ban that became law in 2010.
The bill would leave the cigarette tax alone at 79 cents per pack. That's about 30 percent for packs that cost $2.50 wholesale. Cigarette packs retail for about $5.
Kansas has not raised its tobacco tax since 2002. In 2010, then-Gov. Mark Parkinson supported raising the cigarette tax by 55 cents to $1.34 per pack, which was then the national average. But the Legislature left that tax alone while raising the general sales tax.
Others testifying against the bill said raising tax rates would simply drive tobacco users across state lines to Missouri or Nebraska, where tobacco taxes are already lower than in Kansas.
"The greater the disparity, the further people will drive — they'll make a weekend of it," said Doug Mays representing the Cigar Association of America. Mays said internet sales, which may not be taxed, are already cutting into local retailers' profits.
Chris Masoner, of the American Cancer Society's Kansas chapter, said taxing all tobacco products at the same rate "just makes sense."
Little cigars, he said, "are cigarettes, make no bones about it. They're the same size, the same shape, they come in packs of 20 — they are cigarettes. But because they're wrapped in a substance made from tobacco and not paper...they're taxed at a lower rate. It's a loop-hole that needs to be closed."
Masoner said the state's tax laws needed to be updated to account for new products, many of which are targeted at kids, he said.
"The current statute was passed in 1972," Masoner said. "The statute is badly out of date and doesn't account arguably for some of the new products, particularly the dissolvable products."
In other business today, the committee heard testimony in support of House Bill 2324, which would extend to e-cigarettes the same penalties that exist for tobacco sales to minors. The testimony was the same as heard Tuesday in the Senate Judiciary committee. The bill passed the House last month by a wide margin.
The hearings on both bills were closed with no action taken.
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