Tobacco Lobbyists Take Aim at Snuff Tax

If you don't know exactly what "snuff" is, you're probably a happier person for it. It's a form of non-cigarette tobacco product that (apparently) the kids in Washington State just love. And state lawmakers have heard plenty this spring about how snuff ought to be taxed.

The issue: right now, Washington taxes snuff based on its value. Any non-cigarette tobacco product faces a Washington State tax equal to 75 percent of its value. The problem with this, according to lobbyists for the fancier brands of snuff, is that it amounts to a "tax subsidy" for cheap snuff. If you buy snuff that costs (making this up) $1.00, the tax on snuff is 75 cents. But if you buy snuff that costs $2.00, the tax is double that-- $1.50. Therefore, the lobbyists say, the current tax structure gives snuff consumers an incentive to buy the cheap stuff. The alternative, as proposed in SB 6092, is to impose the same $1.88 tax on each ounce of snuff sold. So the cheapest and swankiest snuff would face basically the same tax.

The only problem with this is that value-based taxes are a pretty good idea-- and economists routinely point out the shortcomings of per-unit taxes like the one SB 6092 would impose. The main problem is that collections from a per-unit tax will only increase when consumption increases. And if current smoking trends are any indicator, snuff consumption is probably not gonna increase any time soon.

Value-based taxes, on the other hand, automatically grow with prices and with the economy. So as snuff prices grow with inflation, state revenues from the current snuff tax will grow too. From a revenue perspective, then, the proposed tax shift seems like a bad deal in the long run.

From a prevention standpoint (usually just as important on tobacco tax issues), it's hard to know what the impact would be. A tax change that make low-quality snuff more expensive and high-quality snuff less expensive will definitely make people less likely to use the lousy stuff. But it's hard to know whether it will discourage snuff consumption in the aggregate. A lot probably depends on whether underage kids (always the target population for prevention efforts) tend to use the cheap stuff or the expensive stuff.

But this sure sounds like a sop to lobbyists for the high-end snuff-makers. It means more tax will be paid on cheap snuff, and less tax will be paid on the good stuff. One guy offering testimony described it aptly:

T.K. Bentler of the Washington Association of Neighborhood Stores said the proposal was no different than shifting the tax burden on a $1 million house to someone with a $250,000 home. “It just doesn’t make sense from a policy perspective why you want to shift that burden,” Bentler said.