Oregon’s tobacco taxes to go up – if voters say so

A proposed tobacco tax hike that was dormant for months was suddenly revived Thursday.

Lawmakers were able to amend it to a more palatable version, with the main change being that it will go to the voters.

House Bill 2270 passed out of the House Committee on Revenue Thursday morning after a work session was scheduled the night before. It now goes to the Joint Committee on Tax Expenditures before getting a floor vote.

Republicans are largely opposed to the idea, and the tobacco lobby has worked hard against it.

If it goes to the ballot, voters can approve it with a simple majority.

The tax is high on the agenda for Democrats, as the revenue would go to fund the Oregon Health Plan as well as anti-smoking efforts.

House Revenue Chair Rep. Nancy Nathanson, D-Eugene, declined to say whether the change to a ballot referral was a concession to get more votes. She said there were a number of changes made to get legislative leadership and Gov. Kate Brown all on the same page.

“We never gave up and we never gave in,” Brown said Thursday. “I’m really pleased that the legislature is at least considering it at this point.”

Rep. Barbara Smith Warner, D-Portland, declined to discuss changes in the bill, but said when votes are an issue, it’s often in the Senate.

Referring the bill to the voters still requires three-fifths majorities, but it also can provide peace of mind for some on the fence. In the Senate, getting 18 votes on a tax will always be difficult, even with Democrats holding 18 seats.

Sen. Dallas Heard, R-Roseburg, said he has been part of the discussions on the bill. He said there is no way he would support it without a ballot referral. He still considering how he’ll vote, but he’s more willing to support it now.

The ballot referral isn’t the only change made. The proposal is still for a $2 increase on a pack of cigarettes, raising the average cost from about $6 to about $8. It will still consider nicotine vaping products as tobacco products for the purposes of taxing. However, the original bill removed a 50-cent ceiling for taxes on cigars. The new version instead imposes a floor of $3 per cigar, which is taxed at 65 percent. Small cigars will be treated as cigarettes, and must be sold in packages of at least 20.

The law would go into effect in 2021 if voters approve.

Overall, outside of the ballot referral, the changes are not very significant, according to legislative analysts.

A legislative analyst testified that under the assumption that a 10% increase in tax leads to an 8.5% reduction in use, Oregon should generate about $160 million per year from the tax hike.

Reps. Lynn Findley, R-Vale, and Werner Reschke, R-Klamath Falls, repeatedly asked if this is a public health policy or a revenue-generating policy. It’s both, Smith Warner said, and there’s nothing wrong with that.

“The level of frustration is rising,” Reschke said.

In fact, it’s not a new concept. Sin taxes have long been used to make money off products that harm health, such as alcohol.

Findley said with the amendment, there hasn’t been time to look through the fiscal impacts and revenue forecasts for the new version.

“I think that’s deplorable,” Findley said.

Rep. Diego Hernandez, D-Portland, also expressed issues with the bill. He said communities of color and the poor smoke more often. They deal with stresses the more privileged don’t, driving them to smoke. The wealthy have better access to help to stop smoking.

“The poor will be paying this,” he said. “I just want to make that clear.”

However, he said the tobacco industry has also targeted these communities. As a mechanism to counteract that, the benefits of the tax outweigh the inequities, he said, and in the end voted to move it out of committee.

Thursday’s hearing was the first on the bill for two months. People around the Capitol often claimed it was dead. Gov. Kate Brown and Speaker Tina Kotek, D-Portland, told media several times that its outcome was far from certain.

Christopher Friend, a lobbyist for the American Cancer Society, said his organization never gave up fighting for the tax — though he always suspected it would end up on the ballot, whether from referral by lawmakers or the tobacco industry funding a campaign to gather signatures to get it on the ballot.

Altria, one of the largest tobacco companies and parent company to Philip Morris, has eight lobbyists working this session, and has spent over $800,000 on lobbying efforts, according to its reports to the state.

Friend said the tobacco industry spread rumors that the tax proposal was dead.

“This is an industry that kills people every day,” he said.

Reporter Aubrey Wieber: [email protected] or 503-575-1251. Wieber is a reporter for Salem Reporter who works for the Oregon Capital Bureau, a collaboration of EO Media Group, the Pamplin Media Group, and Salem Reporter.