House bill seeks to increase tobacco tax for cancer research

HONOLULU — A bill seeking to increase the tax on cigarettes and vaping products at the state Legislature is moving forward, but without the actual increase first proposed.

In its original form, House Bill 2504 sought to increase the excise tax to 18 from 16 cents per cigarette or little cigar sold by a wholesaler or dealer, starting in July. In its latest version, this tax rate would no longer be increased, but would extend to vape products, including electronic smoking devices and e-liquids.

The bill — which is part of Gov. Josh Green’s package — aimed to increase state tax revenues to support the University of Hawai‘i Cancer Research Center while reducing nicotine consumption.

The move to increase taxes on tobacco products is supported by the state Health Department, American Cancer Society and Hawai‘i Pacific Health, among numerous other health advocates who agreed raising the price of tobacco products is an effective way to reduce consumption.

It’s opposed by ABC Stores, Retail Merchants of Hawai‘i and the Hawai‘i Smokers Alliance, which said raising taxes would affect small, locally owned businesses, plus make these products more attractive to shoplifters and create a black market.

The bill morphed during its progression from House to Senate to House, and in its latest version revises the proposed excise tax back down to 16 cents per cigarette, which is what rates have been since July 2011.

Additionally, the excise tax is to be on cigarettes, e-cigarettes and e-liquids but no longer on little cigars — a shorter, narrower version of large cigars with considerable amounts of nicotine. The latest bill does not list little cigars.

Lola Irvin, administrator of DOH’s Chronic Disease Prevention and Health Promotion Division, supports reinstating the original rate of 18 cents per cigarette as well as per little cigar.

She supports the addition of the tax for each electronic smoking device and e-liquid sold, but the removal of little cigars from the bill is concerning because they are harmful to human health, she said, with greater incidents of oral cancer.

Cigars, which are often flavored, are also becoming increasingly popular among young adults due to celebrity influencers, she said.

Another concerning trend found in surveys, she said, is that youths who vape are also more likely to smoke conventional cigarettes later in life. Surveys found that 27 percent of adults ages 18 to 24 now say they vape as well as smoke conventional cigarettes.

Dismal session

The legislative session has been a disappointing one overall for youth and health advocates, who have been working for years to ban flavored tobacco and vape products.

Despite momentum at the county level, bills advancing a ban on flavored tobacco products failed to move this legislative session.

With the Honolulu City Council’s passage of Bill 46, which banned the sale of flavored tobacco products, several bills this session sought to reinstate county home rule, giving authority back to counties to regulate tobacco sales.

Under Act 206, county rules regulating the sale of tobacco are currently preempted by state law. But bills aiming to repeal that state law were deferred early in the session.

Luke Itomura, a freshman at Punahou School, was among more than 100 students from across the state who gathered for a rally at the state Capitol in March to ask lawmakers to take action against “Big Tobacco.”

Itomura, who is with the Coalition for a Tobacco-Free Hawai‘i Youth Council, said it is frustrating to compete with paid lobbyists who consistently fight these bills.

“The majority of lawmakers tell us they support our cause, yet there’s been no progress for six years,” he said.

With an estimated 1,400 tobacco-related deaths per year over six years, that adds up to 8,400 lives that could potentially have been saved, he said. Additionally, polls have shown the majority of voters support eliminating flavored tobacco products.

“We’re just going to come back next year,” he said. “We’re not going to give up.”

Irvin said DOH still believes a ban on flavored vapes and tobacco products is instrumental to preventing youth from getting hooked on nicotine in the first place. The e-cigarettes nowadays are high in nicotine and highly addictive, which is harmful for developing brains.

“What we’re also hearing is that more and more elementary school students are using e-cigarettes,” she said. “We have been hearing it from teachers, and we have seen it in our data.”

Advocates say higher taxes and prices for vapes and cigarettes should help deter youth, who are more sensitive to prices, from starting the habit or encourage them to quit.

“We’re here to help them quit,” she said.

Citing the U.S. surgeon general, DOH testified that increasing the price of tobacco products is the single most effective way to reduce consumption and that a 10 percent increase in price has been estimated to reduce overall cigarette consumption by 3 percent to 5 percent.

Cigarette smoking takes a financial toll on the state, DOH said, to the tune of $611 million a year in estimated health care costs.

The cigarette tax has not increased since 2011, but when it did, Irvin said, there was an observed decrease in high school cigarette use.

Where funds go

Efforts to direct additional tax revenues to the UH Cancer Research Center also met with opposition from those who say funding should be raised instead from outside donations and grants.

As currently written, a portion of the revenues goes to several special funds: one for Hawai‘i cancer research, one for the trauma system, one for community health centers and one for emergency medical services.

The first bill doubled the allotment to the cancer research fund, starting June 30, to 4 cents per cigarette or e-cigarette.

The latest version cuts that amount back to its original 2 cents per cigarette and clarifies that these revenues are not be used for early clinical trials in cancer research. Additionally, it adds that 1 cent per cigarette will go to a tobacco enforcement special fund.

Under Act 62, which became law on July 1, e-cigarettes and e-liquids are classified as tobacco products subject to excise taxes and licensing requirements.

The state Department of Taxation noted that e-smoking devices and e-liquids under that law are currently subject to taxes, at the rate of 70 percent of the wholesale price of each product sold or possessed by a wholesaler or dealer.

To streamline the administration of the tax, it recommends increasing the 70 percent rate instead of adding an additional tax of 16 cents per item.

The Tax Foundation of Hawai‘i testified that if the goal was to stop smoking and vaping, then why not ban them instead of imposing a higher tax. Lawmakers often impose “sin taxes” on tobacco and alcohol products, the foundation said, but fiscal reliance on such funds is inadvisable.

The result has been a decline in tax collections for the cancer research center, which has become “a victim of the success of tobacco cessation programs.”

But DOH and other health advocates, including the American Lung Association in Hawai‘i, HPH and Adventist Health Castle testified in support of increasing tax revenues for the UH Cancer Research Center.

Irvin said there is a nexus, since the center is working to increase early lung cancer screening.

“Such funding not only saves lives,” wrote Ryan Ashlock, president of Adventist Health Castle, “but also contributes to the growth of innovative technologies and medical advancements that benefit Hawai‘i and the Pacific region including U.S. affiliated Pacific islands.”

House Bill 2504, HD 2, SD 2

w Expands cigarette tax levied upon wholesaler or dealer to electronic smoking devices and e-liquids.

w Starting July 1, imposes an excise tax of 16 cents for each cigarette, e-smoking device and e-liquid sold, used or possessed by a wholesaler or dealer (originally proposed at 18 cents).

w Requires 1.0 cent per cigarette, e-cigarette and e-liquid, but no more than $100K per fiscal year, be deposited into the Tobacco Enforcement Special Fund.

w After June 30, sets aside 2 cents per cigarette, e-smoking device and e-liquid to be deposited to the Hawai‘i cancer research special fund (originally proposed at 4 cents) but clarifies that revenues shall not be used for early clinical trials; sets aside 1.25 cents per cigarette, e-smoking device and e-liquid to be deposited to each special fund set up for the trauma system, community health systems and emergency medical services.

w Under Act 62, which became law on July 1, e-cigarettes and e-liquids are classified as tobacco products subject to excise taxes and licensing requirements.