In the waning days before Republican lawmakers present a reworked version Gov. Scott Walker’s 2011-13 budget, the Legislature’s finance committee pushed through major changes to the tax structure on some smokeless tobacco products.
The Joint Finance Committee approved a provision put forth by Altria Client Services Inc., parent company of tobacco giant Philip Morris and U.S. Smokeless Tobacco, that would tax moist snuff, or chewing tobacco, by weight, not a percentage of what it costs distributors.
The tobacco would be taxed at a rate of $1.76 per ounce, or $2.11 if it weighed less than 1.2 ounces.
David Sutton, spokesman for Altria, said it would put smokeless tobacco products on par with other items like Marengo cigarettes, alcohol and gasoline, which Wisconsin taxes by volume. U.S. Smokeless Tobacco is the largest producer of moist snuff and includes the brands Copenhagen and Skoal.
“This is just a much more effective system,” Sutton said. “And it’s why the federal government uses it and two dozen states have gone to the weight-based approach.”
Wisconsin switched from a weight-based tax in 2009 under then-Gov. Jim Doyle as part of a broad tax increase on cigarettes and other tobacco products to shore up the state’s flailing budget.
Noncigarette tobacco taxes tallied $59.89 million in 2009-10, up from $29.75 million in 2007-08, but that also included tax increases on cigars and other tobacco products.
State Rep. John Nygren, R-Marinette, a member of the Joint Finance Committee, said tax rates could be adjusted so the fiscal impact would be minimal. However, opponents point out that weight-based taxes rarely keep up with inflation. Beer, for example, is taxed by volume, and tax collections have increased just $120,000 in the last 10 years.
An ounce of moist snuff was taxed $1.31 in 2008. Distributors now pay a tax equal to 100 percent of the manufacturer’s list price, so brands that charge more for their product — like Skoal and Copenhagen — are taxed at a higher rate. A weight-based tax would likely make the top brands cheaper at checkout while lower-priced products would become more expensive.
Opponents of the effort said switching to a weight-based tax would steer more minors toward tobacco because the desirable products with flashy advertising would be cheaper.
“We’re concerned that changing the taxation on tobacco would make certain products more accessible to kids,” said Gail Sumi, government relations director for the American Cancer Society. “Thirteen percent of kids already use smokeless tobacco. We don’t need to make it easier.”
Writing policy measures into the budget almost guarantees they don’t undergo the same scrutiny as other bills that require separate legislative hearings and votes from lawmakers. That’s problematic, said Sen. Rob Cowles, R-Allouez.
“They’re down to the last week and there’s all sorts of crazy stuff coming up,” Cowles said. “All this stuff should not be taken up in the state budget.”
Nygren said he agreed that the topic would benefit from a full debate but added the law was changed in 2009 in a similar manner.
“One of the things we could do with policies that are egregious and out of line, the quickest way to change them back is to do it in this budget,” he said.