Extras on Excise: North Dakota Tobacco Users are Feeling the Heat from Proposed Tax Hikes


North Dakota residents will have the opportunity to support a firm stance against tobacco use by voting for a measure that would increase the tax on cigarettes by 400 percent on November’s 2016 general election ballot.


North Dakota’s Measure 4, if passed, would increase the tax on a package of 20 cigarettes from $0.44 to $2.20. It would also increase the excise tax assessed on other tobacco products (such as cigars, pipe tobacco and other forms of tobacco) from 28 percent to 56 percent of the wholesale purchase price.  


Significantly, the text of the initiative includes liquid nicotine in its definition of tobacco products, so e-cigarette and inhalation device users would be affected by tobacco excise taxes for the first time.


One supporter of the measure is the Raise It for Health North Dakota coalition, which believes that the tax increase will bring such benefits as prevention and reduction in tobacco use, health care cost reduction, and program funding for state’s veterans and residents suffering from mental health issues.


The opposition includes the North Dakota Retail Association (NDRA) because of the possible financial losses retailers may face and the cutbacks that may stem from the losses, according to NDRA President Mike Rud.


The revenue generated from the tobacco tax increase is estimated to be at around $200 million for the first two years. Using this revenue, the veteran’s tobacco tax trust fund will assist programs and services geared toward veterans and their dependents and will go into effect with the passage of Measure 4. The community health trust fund supports programs committed to an extensive behavioral health plan, local health entity services, and “chronic disease detection, prevention, treatment and control programs.”


Measure 4 would also repeal an existing tobacco tax exemption under N.D. Cent. Code §57-36-24 for all tobacco products given for distribution to the occupants of the state veteran’s home or state hospital.


North Dakota is joined by California, Colorado and Missouri in having 2016 election ballot initiatives with proposals to increase cigarette taxes. California’s Proposition 56 would raise the tax on a pack of cigarettes from $0.87 to $2.87 - about a 230 percent increase. Colorado’s Initiative 143 proposes imposing an additional tax on cigarettes that would increase the tax on a pack of cigarettes from $0.84 to $2.59 - about a 208 percent increase. Missouri has two proposed initiatives on their ballot meant to increase cigarette taxes. Constitutional Amendment 3 proposes gradually increasing the tax on a pack of cigarettes from $0.17 until it reaches $0.77 - about a 353 percent increase; and Proposition A would gradually increase the tax from $0.17 to $0.40 - about a 135 percent. North Dakota, although small in population and size compared to the mentioned states, is looking to stand out with its whopping 400 percent cigarette tax increase.


The outcome of the general election on these measures could be an indication of what ranks higher in taxpayer concerns - future health benefits or continued retailer stability.    



Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Does the possibility of fewer future tobacco users outweigh the impact of current retailer financial losses, when it comes to increasing the tax on tobacco products? 

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