With just weeks left in Oregon’s legislative session, Democratic leaders have put another contentious issue on their to-do list: a tobacco tax hike.
In a hearing Thursday, the House Revenue Committee took up House Bill 2270, a long-dormant bill to raise taxes on cigarettes and other products. After making substantial amendments, the committee moved the bill on.
The bill's newfound momentum sets up what could be another divisive fight as the session approaches adjournment. As with all revenue-raising measures, three-fifths of lawmakers will have to approve the bill to pass it.
The new version of House Bill 2270 contains many of the same details it did when introduced by Gov. Kate Brown at the outset of session. The bill would:
- Raise taxes on cigarettes from $1.33 per pack to $3.33 per pack, bringing Oregon roughly in line with taxes in Washington and California.
- Eliminate a 50-cent cap on taxes for premium cigars and mandate that those cigars cost more than $3 apiece.
- Subject e-cigarettes and other vaping products to the 65% wholesale tax currently imposed on other non-cigarette tobacco products.
Amendments approved Thursday add a number of notable changes.
The bill now contains no preemption on local taxes for vaping products, meaning cities and counties could choose to tax them. HB 2270 also now has a provision referring the tax increase to the November 2020 ballot, should it pass the Legislature. And the bill specifies that some money raised from the tax increase could be spent on mental health care — a key priority for lawmakers this year — and on smoking-related health problems among disproportionately impacted groups.
Revenue staffers haven’t said how much money the bill could raise in total, but Dae Baek, a senior economist with the Legislative Revenue Office, told lawmakers it could generate $160 million from the cigarette tax increase alone.
The governor’s office has estimated the bill would generate $95 million in 2019-21 budget, if it goes into effect in December 2020. It’s expected to raise nearly $350 million every two years after that.
The tobacco tax increase has been a goal for Gov. Brown, who made it a key part of her plan to find longer-term funding for the state's public health care system, the Oregon Health Plan. That plan has backing from major health care players in the state.
Bolstering the health care budget was a key reason House Speaker Tina Kotek, D-Portland, gave earlier this week when she suggested that leadership would revive HB 2270. Prior to Thursday, the bill’s latest hearing was in April.
The bill is "important for the stability of the [Oregon] Health Plan,” Kotek said. “There’s still a policy desire to get that done. It’s going to be whether or not we have the votes on both sides of the building.”
Public health groups say the bill is important for another reason: It's expected to discourage Oregonians from smoking. A 2001 study suggested that a 10% increase in cigarette prices can reduce adult smoking between 3% and 5% — with a higher impact on youth smoking.
Baek told lawmakers Thursday his office assumed a 10% increase in price could reduce smoking by more than 8%. HB 2270 would increase cigarette costs by roughly a third.
The proposal has met outcry from convenience stores and vape shop owners, who warn their businesses will be harmed by a tax increase.
History suggests a ballot fight could be bruising — and expensive. When voters last considered a tobacco tax increase in 2007, tobacco companies spent $12 million to defeat it. That crushed the less than $4 million raised by proponents. The measure failed.
Supporters of a tax increase have said backing from the health care industry should give the tax hike a better chance this time around.
“This time we're gonna have a much bigger coalition,” state Sen. Laurie Monnes Anderson, D-Gresham, a chief proponent of the 2007 measure, told OPB earlier this year.
First, though, the bill has to make it out of the building. And while Democrats have margins in both the House and Senate that would allow them to pass HB 2270 without Republican support, GOP lawmakers suggested Thursday they’d raise serious objections.
Rep. Werner Reschke, R-Klamath Falls, accused Democrats of pushing through an amended bill without giving the public a chance to weigh in.
“This is a gut-and-stuff and there’s been no public hearing,” said Reschke, referring to the process of completely replacing a bill’s content with an amendment. “Without a public hearing, we make a mockery of the process.”
Reschke also lamented the fact that an increase in cigarette taxes could stop Washington residents from coming to Oregon to purchase their smokes — and thereby helping fund health care.
"I like the fact that we have folks from Washington subsidizing the Oregon Health Plan," he said.
Rep. Lynn Findley, R-Vale, derided Democrats for passing the bill out of the Revenue Committee without a detailed analysis of how much revenue it would actually bring in. A third Republican on the committee, Rep. Greg Smith, of Heppner, supports the bill.
It wasn’t just Republicans raising concerns. Rep. Diego Hernandez, D-Portland, noted that the cigarette tax would be regressive and have disproportionate impact on minority communities. He supported the bill, he said, because he thinks its benefits outweigh those issues.
“The poor will be paying this,” Hernandez said. “I just want to make that clear.”