The Senate Finance Committee is currently considering a bill introduced by Senator Tom Harkin (Iowa) that would dramatically increase the excise tax rates for small cigarettes and cigars, pipe tobacco, roll-your-own tobacco, and smokeless tobacco. The proposed legislation, called the “Healthy Lifestyles and Prevention America Act,” or “HeLP America Act, is intended “[t]o improve the health of Americans and reduce health care costs by reorienting the Nation’s health care system toward prevention.” The Act addresses everything from nutrition in schools, to community gardens, to tobacco taxes and incentives to reduce tobacco use.
Regarding tobacco taxes, the Act would increase the tax on small cigars and cigarettes from $50.33 per thousand to $77.83 per thousand. The tax on pipe tobacco would jump from 2.8311 cents/pound to $38.32/pound. The tax on roll-your-own tobacco would likewise increase to $38.32 pound, up from the current rate of $24.78/pound. Snuff tax rates would increase from $1.51/pound all the way to $20.75/pound, while the tax on chewing tobacco would increase from 50.33 cents to $8.50.
In another financial blow to manufacturers and consumers, the Act implements an annual tobacco use survey to be published by the Secretary of Health and Human Services. The survey will assess the tobacco use of youth under the age of 18 within the 30-days prior to the conduct of the survey. If the results of a survey indicate that a pre-determined tobacco use reduction goal has not been met, then the Secretary can assess an industry-wide monetary penalty on cigarette manufacturers. Each manufacturer’s share of the penalty will be based on its brand share as determined by the survey. A manufacturer’s failure to pay an assessed penalty will result in an additional penalty.
Troutman Sanders’ Tobacco practice will continue to monitor the status of this legislation and report significant developments.