STAND. COM. REP. NO. 1035

Honolulu, Hawaii

RE:    H.B. No. 895

       H.D. 2

       S.D. 1

Honorable Colleen Hanabusa

President of the Senate

Twenty-Fifth State Legislature

Regular Session of 2009

State of Hawaii

Madam:

     Your Committee on Health, to which was referred H.B. No. 895, H.D. 2, entitled:

"A BILL FOR AN ACT RELATING TO TAX ON TOBACCO PRODUCTS OTHER THAN CIGARETTES,"

begs leave to report as follows:

     The purpose of this measure is to deter the use of tobacco products other than cigarettes, including smokeless tobacco, snuff, cigars, and pipe tobacco, by:

     (1)  Increasing the tobacco tax on such products from forty per cent to eighty per cent of the wholesale price; and

     (2)  Requiring that a percentage of the proceeds collected be deposited into the community health centers special fund.

     Your Committee received testimony in support of this measure from the Hawaii Primary Care Association, the Coalition for a Tobacco-Free Hawaii, the American Lung Association, the United Filipino Council of Hawaii, the Asian America Network of Cancer Awareness Research, the Filipino American Citizens League, Filipino Coalition for Solidarity, the Filipinos for Affirmative Action, Nursing Advocates & Mentors Inc., and the Oahu Filipino Community Council.  Testimony in opposition to this measure was submitted by the Department of Taxation and the Cigar Association of Hawaii.  Comments and amendments on this measure were offered by the Tax Foundation of Hawaii.  The American Heart Association and the American Cancer Society support this measure with amendments.  Comments on this measure were submitted by the Department of Budget and Finance.

     Written testimony presented to the Committee may be reviewed on the Legislature's website.

     Your Committee finds that tax increases on tobacco products have proven to be an effective means of reducing youth consumption of tobacco.  To ensure that tobacco products are taxed at rates comparable to cigarette taxes, the tax on tobacco products should gradually increase.

     Your Committee further finds that a portion of the tax revenues generated from tobacco products should be used for tobacco prevention programs.

     Accordingly, your Committee has amended this measure by:

     (1)  Increasing the excise tax on tobacco products to eighty-five per cent on September 30, 2009, ninety-five per cent on September 30, 2010, and one hundred five per cent on September 30, 2011;

     (2)  Requiring that a percentage of the amount of tax collected on tobacco products be deposited to the credit of the Hawaii tobacco prevention and control trust fund established pursuant to section 328L-5, Hawaii Revised Statutes, and the health systems special fund pursuant to section 323F-21, Hawaii Revised Statutes, in addition to the community health centers special fund;

     (3)  Changing the effective date to July 1, 2050, to encourage further discussion on this matter; and

     (4)  Making technical, nonsubstantive amendments for the purposes of clarity and style.

     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 H.B. No. 895, H.D. 2, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 895, H.D. 2, S.D. 1, and be referred to the Committee on Ways and Means.

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

____________________________

DAVID Y. IGE, Chair