STAND. COM. REP. NO. 1377

Honolulu, Hawaii

, 2019

RE: S.B. No. 887

S.D. 2

H.D. 1

Honorable Scott K. Saiki

Speaker, House of Representatives

Thirtieth State Legislature

Regular Session of 2019

State of Hawaii

Sir:

Your Committee on Health, to which was referred S.B. No. 887, S.D. 2, entitled:

"A BILL FOR AN ACT RELATING TO TOBACCO TAXES,"

begs leave to report as follows:

The purpose of this measure is to amend provisions relating to taxes on tobacco products. Specifically, this measure:

(1) Increases the cigarette and tobacco tax; and

(2) Expands the disposition of revenues to include:

(A) Repayment for medical school loans for qualified graduates of the John A. Burns School of Medicine; and

(B) The Health Systems Special Fund.

The Department of Health, University of Hawai‘i Cancer Center, East Hawaii Region of the Hawaii Health Systems Corporation, Hawaii Health Systems Corporation, American Cancer Society Cancer Action Network, American Heart Association, Hawai‘i Public Health Institute, and several individuals testified in support of this measure. JT International U.S.A., Inc., Irie Hawaii, Hi Lyfe Vaporz, LLC, ABC Stores, Retail Merchants of Hawaii, Hawaii Smokers Alliance, and many individuals testified in opposition to this measure. The Department of Taxation and Tax Foundation of Hawaii provided comments.

Your Committee has amended this measure by:

(1) Changing the proposed tax increases and disposition of revenue amounts to unspecified amounts; and

(2) Specifying that moneys deposited into the Cancer Research Special Fund from cigarette and tobacco taxes are to be used for research of liver and bile duct cancer.

Your Committee notes that a strong foundation of education, prevention, and intervention is essential for the success of any program aimed at reducing the number of cigarette smokers in Hawaii. Your Committee further notes a concern that increasing the tax on cigarettes and tobacco products will create a robust black market of cigarettes procured online from states with lower cigarette taxes. Finally, your Committee notes that the proposed increase of five cents per cigarette would be the greatest tax increase since the tax was first introduced. However, your Committee notes the testimony of the American Cancer Society Cancer Action Network that significant increases in the retail price of cigarettes directly correlate to a reduction in overall cigarette consumption and a reduction in youth tobacco consumption, while small tax increases do not produce significant public health benefits or cost savings as tobacco companies are able to offset these increases with temporary price cuts, coupons, or other promotional discounts.

As affirmed by the record of votes of the members of your Committee on Health that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 887, S.D. 2, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 887, S.D. 2, H.D. 1, and be referred to your Committee on Consumer Protection & Commerce.

Respectfully submitted on behalf of the members of the Committee on Health,

____________________________

JOHN M. MIZUNO, Chair