Legislature(2009 - 2010)CAPITOL 106

03/26/2009 03:00 PM House HEALTH & SOCIAL SERVICES

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03:04:08 PM Start
03:04:31 PM HB188
03:39:24 PM Confirmation Hearing|| Commissioner, Department of Health and Social Services
04:11:47 PM State Medical Board
04:23:38 PM HB188
04:50:22 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Confirmation Hearings: TELECONFERENCED
Dept. of Health & Social Services,
Commissioner Bill Hogan;
State Medical Board
Heard & Held
<Bill Hearing Rescheduled from 03/24/09>
HB 188-TAX ON MOIST SNUFF                                                                                                     
3:04:31 PM                                                                                                                    
CO-CHAIR KELLER announced  that the first order  of business would                                                              
be HOUSE BILL NO.  188, "An Act relating to the  taxation of moist                                                              
snuff tobacco,  and amending the  definition of 'tobacco  product'                                                              
in provisions levying an excise tax on those products."                                                                         
3:05:20 PM                                                                                                                    
CO-CHAIR HERRON  introduced HB 188  as the prime sponsor  and said                                                              
that he had prepared  a Committee Substitute (CS) for  HB 188, but                                                              
had not  yet distributed  it to  other members  of the  committee.                                                              
He  clarified   that  the  committee   would  first   hear  public                                                              
testimony on  HB 188 until 3:30  p.m. and then hear  testimony for                                                              
the confirmations.                                                                                                              
3:06:36 PM                                                                                                                    
REPRESENTATIVE   COGHILL  commented  that   a  CS  might   require                                                              
additional testimony.                                                                                                           
3:07:04 PM                                                                                                                    
CO-CHAIR  KELLER  said  that  public  testimony  would  be  opened                                                              
3:07:18 PM                                                                                                                    
CO-CHAIR HERRON read  from the Sponsor Statement  [Included in the                                                              
members'  packets.] and  explained  that HB  188  changed the  tax                                                              
methodology  used  for  smokeless  tobacco products  in  order  to                                                              
discourage the use  of tobacco.  He stated that the  use of "chew"                                                              
was a crisis in  his region.  He declared that  the additional tax                                                              
revenue  would be  placed in  the  general fund  or the  cessation                                                              
fund.   He supported a  change from the ad  valorem tax to  a unit                                                              
3:08:40 PM                                                                                                                    
DR.   JAY  BUTLER,   Chief   Medical   Officer,   Office  of   the                                                              
Commissioner,  Department of  Health and  Social Services  (DHSS),                                                              
testified that  one study revealed  that a 10 percent  increase in                                                              
the tax on  smokeless tobacco would  lead to a 4  percent decrease                                                              
in the  use by adults,  and a 6 percent  decrease in use  by boys.                                                              
He  allowed that  the health  risks  are well  known and  included                                                              
cancers of  the mouth, gum  disease, and cardio  vascular affects.                                                              
He said  that the  use of  smokeless tobacco  was high  in Alaska,                                                              
almost 5  percent of adults  in 2008.   He disclosed  that tobacco                                                              
and obesity were  the two drivers of increased  health care costs.                                                              
He shared that DHSS  was concerned about the weight  based tax, as                                                              
it  would reduce  the  tax on  some products  and  create a  price                                                              
disparity   which  favored   the  newer,   light  weight   tobacco                                                              
products.   He  described snus  as a  smokeless, heavily  flavored                                                              
tobacco product,  packaged in small,  self contained  tin packets.                                                              
He  mentioned that  the juices  could be  swallowed which  removed                                                              
the  social stigma  of spitting.   He  described the  orbs as  gel                                                              
strips, which  dissolved in the  mouth, but provided  the nicotine                                                              
kick.  He acknowledged  that the product weight  created an uneven                                                              
tax field  and price  disparity.   He compared  the weights  for a                                                              
tin of snus  to be 10 percent of  a tin of Copenhagen,  so the tax                                                              
would also  be 10 percent that of  the Copenhagen.  He  also noted                                                              
that  weight based  taxes  were inflation  proof,  as the  portion                                                              
price for tax would decline as the product price increased.                                                                     
3:12:43 PM                                                                                                                    
DR. BUTLER expressed  concern that HB 188 would  create low priced                                                              
tobacco products, which would increase tobacco use among youth.                                                                 
3:13:16 PM                                                                                                                    
REPRESENTATIVE CISSNA  asked about  the [health] qualities  of the                                                              
gel strip orbs.                                                                                                                 
3:13:37 PM                                                                                                                    
DR.  BUTLER  replied  that  the   health  effects  were  not  well                                                              
defined,  but he  observed that  it  was banned  in Australia  and                                                              
most of the European Union.                                                                                                     
3:15:51 PM                                                                                                                    
EMILY  NEENAN,  Alaska  Government  Relations  Director,  American                                                              
Cancer  Society Cancer  Action Network  (ACS  CAN), applauded  the                                                              
objectives  of HB 188  to increase  the price,  decrease the  use,                                                              
and  decrease the  death and  disease  from the  use of  smokeless                                                              
tobacco.  She  disclosed that certain populations  of Alaskans had                                                              
some  of the  highest smokeless  tobacco use  in the  world.   She                                                              
reported  that  67  percent  of   pregnant  women  in  the  Yukon-                                                              
Kuskokwim  (Y-K) region  used smokeless  tobacco.   She  expressed                                                              
concerns about  the current version of  HB 188.  She  relayed that                                                              
the bill did not  have any price adjustment for  inflation, as the                                                              
weight based  tax was fixed.   [She passed  around a tin  of camel                                                              
snus.]   She  expressed concern  about  the use  of these  tobacco                                                              
products  by youth,  as  they were  discreet,  easy  to hide,  and                                                              
nicely  flavored.   She  mentioned  that  the current  ad  valorem                                                              
tobacco tax  rate of 75  percent of wholesale  price had  not been                                                              
increased since 1997.                                                                                                           
3:20:48 PM                                                                                                                    
REPRESENTATIVE  CISSNA asked  if  the use  of  smaller amounts  of                                                              
tobacco, such as the use of snus, eliminated the dangers.                                                                       
3:23:01 PM                                                                                                                    
MS.  NEENAN,  in  response to  Representative  Cissna,  said  that                                                              
ingesting  tobacco  was not  safe.   She  allowed  that there  was                                                              
debate about  the amount of  risk for different  tobacco products,                                                              
but she compared this to playing Russian roulette.                                                                              
3:23:59 PM                                                                                                                    
JOHANNA BALES,  Deputy Director,  Anchorage Office,  Tax Division,                                                              
Department of  Revenue (DOR), referred  to the fiscal note  for HB
188,  and  explained  that  there  would  be  an  initial  revenue                                                              
increase,  but that  as the  lightweight  tobacco products  became                                                              
more prevalent,  the weight  based tax  method would decrease  the                                                              
tax revenue.                                                                                                                    
3:25:30 PM                                                                                                                    
CO-CHAIR HERRON  disclosed that  the CS for  HB 188  would address                                                              
these issues.                                                                                                                   
3:26:16 PM                                                                                                                    
MICHAEL  HOUGH,   Director,  Commerce,   Insurance  and   Economic                                                              
Development &  Public Safety and  Elections Task  Forces, American                                                              
Legislative  Exchange Council  (ALEC),  declared that  this was  a                                                              
tax fairness issue,  and that ALEC favored a weight  based tax, as                                                              
opposed  to an  ad valorem  tax.   He  explained  that ad  valorem                                                              
taxed at  different rates for like  products, as the tax  was less                                                              
for a less  expensive product.   He expressed that the  ad valorem                                                              
tax would unfairly influence consumer choice.                                                                                   
3:28:02 PM                                                                                                                    
MONTE  WILLIAMS  informed  the   committee  that  USSTC  were  the                                                              
manufacturers  of  the  round  cans  of  smokeless  tobacco.    He                                                              
explained   that   excise   taxes  were   levied   on   individual                                                              
measureable  units.   He cited  as examples,  a gallon  of gas,  a                                                              
liter  of wine,  and a  single cigarette.   He  stated that  sales                                                              
taxes were  levied on the  price of the  product.  He  referred to                                                              
the Other  Tobacco Products (OTP)  tax, which was a  percentage of                                                              
the wholesale  price on  all tobacco  products except  cigarettes.                                                              
He commented on  the introduction and sales growth  for discounted                                                              
tobacco  products   priced  "below   the  premium  level,"   which                                                              
resulted in  the loss of tax revenue  for Alaska.  He  opined that                                                              
ad  valorem taxes  favored  lower priced  brands,  and that  lower                                                              
taxes  should not  be  a  reward for  lowering  the  price of  the                                                              
3:34:29 PM                                                                                                                    
MR. WILLIAMS  said that the ad valorem  tax was not a  good excise                                                              
tax  policy.     He   reported  that   tobacco  prices   were  not                                                              
increasing, so there  was no increased revenue with  an ad valorem                                                              
tax.  He cited  that price cuts resulted in tax  revenue cuts.  He                                                              
commented that  a weight based  tax was  good for revenue,  as the                                                              
same tax  was applied  to all the  products.   He stated  that the                                                              
weight based tax  was not a reward for lower prices.   He reported                                                              
that  16 states  had adopted  a weight  based tax.   He  expressed                                                              
that USSTC supported HB 188.                                                                                                    
[HB 188 was taken up later in this meeting.]                                                                                    
HB 188-TAX ON MOIST SNUFF                                                                                                     
4:23:38 PM                                                                                                                    
CO-CHAIR KELLER announced  that the final order  of business would                                                              
be  a return  of the  committee's  attention to  discussion of  HB
JENNY  OLENDORFF expressed  concern  for tobacco  use,  especially                                                              
among  children.   She  stated  that  she  had worked  in  tobacco                                                              
prevention  programs   for  three   years,  and  she   reported  a                                                              
documented  increase in  the use  of  smokeless tobacco  products.                                                              
She noted that  the increase of regulations for  cigarette use had                                                              
increased  the use  of smokeless  products by  youth.  She  stated                                                              
that kids considered  smokeless use to be a  healthier alternative                                                              
to smoking.   She offered  her belief  that tobacco  companies had                                                              
increased its  marketing of smokeless  tobacco to the youth.   She                                                              
opined that HB  188 would make lightweight tobacco  products, such                                                              
as  snus, more  affordable  for  youth.   She  opined that  weight                                                              
based  taxes  had   historically  increased  tobacco   use.    She                                                              
declared  that cheaper, more  available,  tobacco products  was "a                                                              
recipe  for  passing   on  a  deadly  addiction   to  yet  another                                                              
generation."  She expressed her interest in the proposed CS.                                                                    
4:26:18 PM                                                                                                                    
STEVE  WARREN   reported  that   he  had  established   a  tobacco                                                              
cessation  program in  Sitka.   He  declared that  HB 188  favored                                                              
lightweight   tobacco  products.     He   described  the   tobacco                                                              
marketing campaign  as designed  to attract  youth.  He  suggested                                                              
that  there be  a tax  on units  of  nicotine.   He expressed  his                                                              
concern with the current version of HB 188.                                                                                     
4:29:52 PM                                                                                                                    
CO-CHAIR HERRON, in  response to Mr. Warren, said  that the CS for                                                              
HB 188 would target the lightweight products.                                                                                   
4:31:31 PM                                                                                                                    
CARRIE  NYSSEN,   Senior  Director  of  Advocacy,   American  Lung                                                              
Association  of Alaska, said  that the  American Lung  Association                                                              
was  concerned  with  the  long  term  effect  of  HB  188.    She                                                              
described  the bill  as special  interest  legislation that  would                                                              
distort the tobacco  taxation system for the benefit  of a tobacco                                                              
manufacturer.  She  endorsed the current ad valorem  tax system of                                                              
tobacco products,  other than cigarettes.   She declared  that the                                                              
weight  based  tax created  a  tax  loophole  for the  low  weight                                                              
products,  and  that  this  tax   would  not  maintain  pace  with                                                              
inflation  or price  increases.   She  expressed  concern for  the                                                              
increased nicotine  addiction of Alaskan youth, as  a weight based                                                              
tax favored  the smokeless tobacco  products that  were attractive                                                              
to youth.   She offered support  for a policy to  increase revenue                                                              
and discourage tobacco use.                                                                                                     
4:34:47 PM                                                                                                                    
REPRESENTATIVE  SEATON,  referring  to  the  testimony  about  the                                                              
addition  of nicotine  to other  products, asked  if nicotine  was                                                              
regulated  by the Food  and Drug  Administration  (FDA) and  if it                                                              
was permitted as a chemical additive to other products.                                                                         
4:35:39 PM                                                                                                                    
MS. NYSSEN said that she would get some information.                                                                            
4:35:59 PM                                                                                                                    
REPRESENTATIVE  CISSNA compared the  current nicotine  additive to                                                              
the historical addition of cocaine to Coca-Cola.                                                                                
4:36:47 PM                                                                                                                    
CHRIS SHIRWIN,  Vice President,  Advocacy and Government  Affairs,                                                              
said  that  the   American  Heart  Association  shared   the  same                                                              
concerns  as the  other agencies.   He  warned of  the harms  from                                                              
smokeless  tobacco,  and the  concern  that these  were  "gateway"                                                              
products.   He said that  a weight based  tax favored  the premium                                                              
smokeless products,  as this  would lower its  taxes.   He lobbied                                                              
to increase  the ad  valorem tax, or  implement a significant  tax                                                              
floor for these products.                                                                                                       
4:41:23 PM                                                                                                                    
REPRESENTATIVE LYNN asked about the goal of the bill.                                                                           
4:41:42 PM                                                                                                                    
CO-CHAIR HERRON  reflected that  "chew" was at  a crisis  level in                                                              
his  district.    He  responded  that his  goal  was  to  increase                                                              
revenue to  the cessation fund, instead  of the general  fund.  He                                                              
opined that the  danger was the new lightweight  tobacco products,                                                              
not the ad valorem tax.                                                                                                         
4:44:11 PM                                                                                                                    
REPRESENTATIVE  LYNN shared  a concern  for the  expansion of  the                                                              
"sin" taxes.                                                                                                                    
4:44:36 PM                                                                                                                    
CO-CHAIR  HERRON said  that he  was annoyed  with the  advertising                                                              
messages.   He established  that his original  intent with  HB 188                                                              
was  to  reduce the  use  of  tobacco products,  and  to  increase                                                              
funding for the cessation grants.                                                                                               
4:45:44 PM                                                                                                                    
CO-CHAIR KELLER  reminded the committee  to keep the  questions to                                                              
the bill at hand.                                                                                                               
4:45:58 PM                                                                                                                    
REPRESENTATIVE  CISSNA declared  that "habit"  had brought  Alaska                                                              
nationwide  attention for  bad  habits.   She  requested that  any                                                              
solution not allow for the continuance of "habits."                                                                             
4:48:08 PM                                                                                                                    
REPRESENTATIVE  SEATON  reopened   the  question  of  whether  the                                                              
placement of  nicotine in  other products  could be restricted  by                                                              
state  law,  if  it  was  not  restricted  by  federal  law.    He                                                              
summarized  about the need  to curtail  nicotine addiction  and he                                                              
commented  on the possibility  of  a "tax floor  per sale,"  which                                                              
would cover weight or quantity.                                                                                                 
4:50:02 PM                                                                                                                    
[HB 188 was held over.]                                                                                                         

Document Name Date/Time Subjects
Confirmation Resumes.pdf HHSS 3/26/2009 3:00:00 PM
HSS188pkt.PDF HHSS 3/26/2009 3:00:00 PM
HHSS 4/9/2009 3:00:00 PM