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SPONSOR: |
|
DATE TYPED: |
|
HB |
|
||
SHORT TITLE: |
Increase Cigarette Tax |
SB |
835 |
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|
ANALYST: |
Neel |
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REVENUE
Estimated Revenue |
Subsequent Years Impact |
Recurring or
Non-Rec |
Fund Affected |
|
FY03 |
FY04 |
|
|
|
|
($276.0) |
($301.0) |
Recurring
|
General Fund |
|
-- |
-- |
Recurring |
County & Municipal Recreation Fund |
|
-- |
-- |
Recurring |
County & Municipal Cigarette Fund |
|
-- |
-- |
Recurring |
|
|
$11,980 |
$13,069 |
Recurring |
|
|
$402.0 |
$439.0 |
Recurring |
UNM Telehealth |
|
$1,009.0 |
$1,101.0 |
Recurring |
UNM Health Sciences |
|
$8,057.0 |
$8,788.0 |
Recurring |
Medicaid Fund |
(Parenthesis ( ) Indicate Revenue Decreases)
LFC files
Responses
Received From
Taxation
and Revenue Department (TRD)
Health
Policy Commission (HPC)
Department
of Health (DOH)
SUMMARY
Synopsis
of Bill
Senate
Bill 835 proposes to increase the cigarette tax by $.30 per pack of 20 from
$0.21 to $.51. Distribution of cigarette
taxes to non-General Fund beneficiaries (except the New Mexico Finance
Authority (NMFA)) is modified to maintain revenues at the FY 2004 projected
levels. Two new distributions are added
which go to the board of regents at UNM—one for 1.05% (center for telehealth) and one for 2.63% (research on emphysema and
lung cancer) of the net receipts attributable to the cigarette tax. There is also a new distribution to the
Supplemental Medicaid Fund for 21% of the net cigarette tax receipts. Finally, there is a new distribution to NMFA
on behalf of the
NMFA
can sell up to $80 million of revenue bonds to add to and improve the
FISCAL IMPLICATIONS
TRD’s Estimating
method:
(1)
Proposed tax increases were converted to
the equivalent percentage increase in price, assuming the average price of a
pack of cigarettes in
(2)
We assume the elasticity of demand for
cigarettes in
(3)
Given the above assumptions, the proposed
tax increases lead to a 12% increase in the average price of taxable
cigarettes, resulting in an 8.4% decline in taxable sales of cigarettes in the
state. Taxable sales have been declining
for the last several years in response to sharp price increases. Even without a tax increase, taxable sales
should drop to 91.7 million packs in FY 2004.
ADMINISTRATIVE IMPLICATIONS
A substantial increase in the cigarette tax will
increase the pressure to enforce this tax.
Significant tax-evasion opportunities present themselves. At present the Department does not have the
personnel to ensure full compliance.
Effective administration of this tax may be impossible without statutory
changes that permit the state to collect the tax when cigarettes first enter
the state. Such a system, employed in
SN/ls