THE House of Representatives on Wednesday unanimously passed House Bill 22-54, which will raise to $4 from $3.75 (not $2.75 as earlier reported) the excise tax per 20 cigarettes, and impose a 75% levy on vaporizers that contain nicotine.
Authored by Rep. Tina Sablan and co-sponsored by Reps. Edwin Propst, Sheila Babauta, Vicente Camacho and Leila Staffler, H.B. 22-54 is supported by the Commonwealth Health Corp. and the Division of Customs and Quarantine.
Aside from "bringing tax rates to a recommended level and setting tobacco tax rates to increase with inflation," the bill will also update the definition of tobacco products in the CNMI's excise tax law.
It redefines cigarette as any product that contains nicotine, is intended to be burned or heated under ordinary conditions of use, and consists of or contains the following:
(1) Any roll of tobacco wrapped in paper or in any substance not containing tobacco.
(2) Tobacco, in any form, that is functional in the product, which, because of its appearance, the type of tobacco used in the filler, or its packaging and labeling, is likely to be offered to, or purchased by consumers as a cigarette.
(3) Any roll of tobacco wrapped in any substance containing tobacco which, because of its appearance, the type of tobacco used in the filler, or its packaging and labeling, is likely to be offered to, or purchased by consumers as a cigarette described in clause 1 of this definition.
The term "cigarette" includes “roll-your-own“ tobacco (i.e. any tobacco which, because of its appearance, type, packaging, or labeling, is suitable for use and likely to be offered to, or purchased by consumers as tobacco for making cigarettes).
For the purposes of this definition of “cigarette" 0.09 ounces of “roll-your-own“ tobacco shall constitute one individual “cigarette.”
The term "cigarette" shall not include products wrapped entirely in whole tobacco leaf that do not have a filter.
H.B. 22-54 proposes to impose a tax of $4 per every 20 cigarettes, or fractional equivalent, and thereafter 50 cents per every 20 cigarettes or fractional equivalent thereof, every calendar year for six years.
The bill will also impose a 75% levy on the invoice price of tobacco substitutes, or vaporizable products and vaporizers, liquids, chewable tobacco products, or other smokable or snuffable substance, material product that contains nicotine, other than cigarettes.
CHCC non-communicable disease bureau administrator, Amber Mendiola testified in support of H.B. 22-54, which now goes to the Senate.
She mentioned the 2016 CNMI non-communicable disease survey, which indicated that one of every four adults smoked cigarettes. The report likewise stated that one of five people chewed betel nut and majority of those who chewed, chewed with tobacco.
Mendiola said data likewise showed that "more kids are trying cigarettes in middle school or earlier."
She said tobacco use is still one of the main leading causes of disease and death in the CNMI. Current research, she added, shows that tobacco is also a risk factor for chronic conditions like diabetes, hypertension and cancer.
"Research from international and national organizations showcase that increasing tobacco taxes can decrease use, especially among our youth," she said.
"The last time I came to speak about this issue, we also heard from individuals who shared economic, social and health benefits that come with supporting healthier lifestyles. We've recently seen that in order to combat terrible weather or a pandemic or just stress from an ever changing environment, policy and systems can create long-term quality of life for all aspects of a person," Mendiola said.
For his part, Customs and Quarantine Director Jose Mafnas said the additional revenue that the measure will bring to the Tobacco Control Fund "will help us purchase equipment, [conduct] training and [obtain] other needed resources to counter smuggling activities in our ports."
A member of the community who declined to be identified said, “If the bill’s goal is to reduce tobacco consumption, how can it bring additional revenue to Customs?”
In the U.S, when Michigan raised its cigarette tax to 75 cents from 25 cents a pack, the result was “a huge, stubborn cigarette-smuggling problem,” according to John Attarian, an adjunct scholar with the Midland, Michigan-based Mackinac Center for Public Policy.
In November 2018, the Washington Post reported that the District of Columbia’s $2-a-pack tax hike on cigarettes resulted in a “drop in legal sales and [a] spike in black market ‘loosies,’” or single cigarettes that were illegally sold for 75 cents each.