Ohio lawmakers urged to change the way smokeless products are taxed

March 31, 2016 at 12:03a.m.

COLUMBUS

A representative of the tobacco industry urged state lawmakers Wednesday to change the way smokeless products are taxed, arguing that price reductions in recent years have reduced overall collection.

But a public-health professor urged the opposite, saying the proposal is part of a strategy by companies to reduce taxes on tobacco products over time.

Both offered testimony before the Ohio 2020 Tax Policy Study Commission, a panel created by last year’s biennial budget to develop longer-term tax changes for the state. On Wednesday, the commission heard comments from half a dozen people who mostly focused on sales-tax-related issues.

Monte Williams, representing Altria and its affiliates (including Phillip Morris), asked lawmakers to consider taxing moist, smokeless tobacco based on the products’ weight instead of its price.

The current price-based system, he said in testimony, “is broken and needs to be fixed.” There are more brands on the market today, with many offering deeply discounted products.

“Under an ad valorem system, when price declines, the state loses tax revenue,” he said in testimony, noting that the state lost nearly $1 million in fiscal 2010 due to smokeless-tobacco price reductions.

More than 20 other states have shifted taxation of such products to be based on their weight, Williams said.

“Weight-based tax system gives the state a revenue stream that is stable and easily estimated from year to year and one that is not reliant on company price policies and marketing programs,” he said in testimony. “It also creates tax equality between similar products and returns to a more traditional excise-tax system. In addition, once in place, a weight-based tax system is easier to administer for both the state and the wholesalers.”