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MISSISSIPPI'S PROPOSED TOBACCO AND VAPING TAXES ARE REGRESSIVE, UNRELIABLE, AND FAIL TO RECOGNIZE TOBACCO HARM REDUCTION

May 27, 2020

By: Lindsey Stroud

KEY POINTS:

  • House Bill 249 would increase the excise tax on all tobacco products except cigarettes from 15 percent to 22.5 percent of the manufacturer’s list price.

  • House Bill 1407 and Senate Bill 2896 would define e-cigarettes as tobacco products, for the purpose of applying the state’s 15 percent manufacturer’s list price tax to vapor products.

  • Senate Bill 2893 would increase the excise tax on combustible cigarettes by $1.00 per pack, from $0.68 to $1.68 per pack.

  • Taxes on tobacco products are regressive and disproportionately impact lower income persons who tend to smoke at higher rates. For example, according to the Mississippi 2018 Behavioral Risk Factor Surveillance System (BRFSS), 69.5 percent of adult smokers in Mississippi earned $34,999 or less a year.

  • Cigarette and tobacco taxes are also inherently unreliable. Mississippi’s last cigarette tax increase was in 2009, which nearly doubled tax revenue from $84 million in 2009 to $156.6 million in 2010. The tax collected has steadily declined in years since, with the Magnolia State collecting $145 million in 2017, an over $10 million decrease from 2010.

  • Mississippi currently dedicate little funding from tobacco settlement payments and taxes on tobacco control programs, including education and prevention.

  • In 2019, the Magnolia state received an estimated $284.4 million in tobacco taxes and settlement payments. In the same year, Mississippi allocated only $8.4 million in state monies, or 2 percent of tobacco monies, to tobacco control programs.

  • In 2018, tobacco companies spent $126.8 million in tobacco marketing in Mississippi.

  • E-cigarettes are significantly less harmful than combustible cigarettes. Indeed, numerous public health groups including Public Health England, the Royal College of Physicians, and the National Academies of Sciences, Engineering and Medicine have noted the reduced harm of vapor products.

  • In 2019, the American Cancer Society declared “e-cigarette use is likely to be significantly less harmful for adults than smoking regular cigarettes […] because e-cigarettes do not contain or burn tobacco.”

  • As many e-cigarette users are former smokers, taxes on vapor products are also regressive. Indeed, according to the 2018 Mississippi BRFSS, 58 percent of e-cigarette users in Mississippi earned $34,999 or less per year and 18 percent of vapers earned less than $15,000 per year.

  • 2015 policy analysis by State Budget Solutions examined electronic cigarettes’ impact on Medicaid spending. In 2012, Mississippi would have saved $402 million in Medicaid costs if all Medicaid recipients who smoked had switched to e-cigarettes.

Several bills have been introduced in the Mississippi Legislature that would increase the state’s excise tax on tobacco products and/or apply a tax to electronic cigarettes and vaping devices.

House Bill 249 would increase the excise tax on all tobacco products except cigarettes from 15 percent to 22.5 percent of the manufacturer’s list price. Two bills – House Bill 1407 and Senate Bill 2896 – would define e-cigarettes as tobacco products, for the purpose of applying the state’s 15 percent manufacturer’s list price tax to vapor products. Lastly, Senate Bill 2893 would increase the excise tax on combustible cigarettes by $1.00 per pack, from $0.68 to $1.68 per pack.

Cigarette and tobacco taxes are regressive and unreliable sources of revenue. Further, excise taxes are often used to deter adult consumption of certain products, as a tobacco harm reduction tool, e-cigarettes’ use should be promoted, not subject to an excise tax. Moreover, all tobacco monies collected from the Magnolia State’s excise tax are currently deposited to the state’s general fund and not earmarked to tobacco control programs or used to address smoking-related health care costs.

Taxes on tobacco products are regressive and disproportionately impact lower income persons who tend to smoke at higher rates. For example, according to the Mississippi 2018 Behavioral Risk Factor Surveillance System (BRFSS), 69.5 percent of adult smokers in Mississippi earned $34,999 or less a year. Only 10 percent of smoking adults in Mississippi reported making over $75,000 per year. Lower income persons also tend to spend a larger percentage of their income on cigarettes. According to a Cato Journal article notes that from 2010 to 2011, “smokers earning less than $30,000 per year spent 14.2 percent of their household income on cigarettes, compared to 4.3 percent for smokers earning between $30,000 and $59,999 and 2 percent for smokers earning more than $60,000.

Cigarette and tobacco taxes are also inherently unreliable. Mississippi’s last cigarette tax increase was in 2009, which nearly doubled tax revenue from $84 million in 2009 to $156.6 million in 2010. The tax collected has steadily declined in years since, with the Magnolia State collecting $145 million in 2017, an over $10 million decrease from 2010. The decline in revenue is similar to other states. The National Taxpayers Union Foundation found from 2001 to 2011, “revenue projections were met in only 29 of 101 cases where cigarette/tobacco taxes were increased.” Pew Charitable Trusts revealed a decline in cigarette consumption caused cigarette tax revenue “to drop by an average of about 1 percent across all states from 2008 to 2016.”

Policymakers should note that Mississippi currently dedicate little funding from tobacco settlement payments and taxes on tobacco control programs, including education and prevention. For example, in 2019, the Magnolia state received an estimated $284.4 million in tobacco taxes and settlement payments. In the same year, Mississippi allocated only $8.4 million in state monies, or 2 percent of tobacco monies, to tobacco control programs. In 2018, tobacco companies spent $126.8 million in tobacco marketing in Mississippi.  

Deeply troublesome is lawmakers are now seeking to tax electronic cigarettes and vaping devices – tobacco harm reduction tools that have helped millions of American adults quit smoking cigarettes.

E-cigarettes are significantly less harmful than combustible cigarettes. Indeed, numerous public health groups including Public Health England, the Royal College of Physicians, and the National Academies of Sciences, Engineering and Medicine have noted the reduced harm of vapor products. In 2019, the American Cancer Society declared “e-cigarette use is likely to be significantly less harmful for adults than smoking regular cigarettes […] because e-cigarettes do not contain or burn tobacco.”

As many e-cigarette users are former smokers, taxes on vapor products are also regressive. Indeed, according to the 2018 Mississippi BRFSS, 58 percent of e-cigarette users in Mississippi earned $34,999 or less per year and 18 percent of vapers earned less than $15,000 per year.

Moreover, the use of e-cigarettes can help reduce smoking-related health care costs. For example, a 2015 policy analysis by State Budget Solutions examined electronic cigarettes’ impact on Medicaid spending. The author estimated Medicaid savings could have amounted to $48 billion in 2012 if e-cigarettes had been adopted in place of combustible tobacco cigarettes by all Medicaid recipients who currently consume these products. This would have amounted to $402 million in Medicaid savings to Mississippi in 2012.

Lawmakers should refrain from relying on excise taxes for revenue-generating measures. Taxes on tobacco products are inherently unreliable and disproportionately impact lower income persons. Further, e-cigarettes have emerged as a powerful tobacco harm reduction tool that can actually reduce smoking-related health care costs. Rather than being subject to sin taxes, policymakers should promote their use.

 

Nothing in this analysis is intended to is intended to influence the passage of legislation, and it does not necessarily represent the views of Tobacco Harm Reduction 101. For more information on vapor products in the Magnolia State, please visit Tobacco Harm Reduction 101’s Mississippi page at https://www.thr101.org/mississippi.

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©2020 by Tobacco Harm Reduction 101.