ASSEMBLY, No. 284
STATE OF NEW JERSEY
PRE-FILED FOR INTRODUCTION IN THE 1996 SESSION
By Assemblyman BATEMAN
An Act concerning the taxation of cigarettes and other tobacco products and designating an amount of the cigarette tax revenues for certain purposes, amending P.L.1948, c.65, P.L.1990, c.39, P.L.1982, c.40, P.L.1966, c.36 and P.L.1992, c.160.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. Section 301 of P.L.1948, c.65 (C.54:40A-8) is amended to read as follows:
301. A tax is hereby imposed on the sale, use or possession for sale or use within this State of all cigarettes at the rate of [$0.02] $0.07 for each cigarette.
The tax rate shall increase by $0.01 biennially commencing January 1, 1997, until the total tax equals $0.14 for each cigarette.
(cf: P.L.1990, c.39, s.15)
2. Section 3 of P.L.1990, c.39 (C.54:40B-3) is amended to read as follows:
3. a. There is imposed a tax of [24%] 84% upon the receipts from every sale of a tobacco product by a distributor or a wholesaler to a retail dealer or consumer.
b. Unless a tobacco product has already been or will be subject to the wholesale sales tax imposed in subsection a. of this section, if a distributor or wholesaler uses a tobacco product within this State, there is imposed upon the distributor or wholesaler a compensating use tax of [24%] 84% measured by the sales price of a similar tobacco product to a retail dealer.
c. Unless a wholesale use tax is due pursuant to subsection b. of this section, if a distributor or wholesaler has not collected the wholesale sales tax imposed in subsection a. of this section upon a sale that is subject to the wholesale sales tax imposed in that subsection a., there is imposed upon the retail dealer or consumer chargeable for the sale a compensating use tax of [24%] 84% of the price paid or charged for the tobacco product, which shall be collected in the manner provided in subsection b. of section 5 of this act.
d. The tax rates set forth in subsections a., b. and c. of this section shall increase by the addition of 12% to those percentage rates every two years commencing January 1, 1997, until the tax rates equal 168%.
(cf: P.L.1990, c.39, s.3)
3. Section 5 of P.L.1982, c.40 (C.54:40A-37.1) is amended to read as follows:
5. a. The sum of $1,000,000.00 of the tax collected pursuant to section 301 of P.L.1948, c.65 (C.54:40A-8), shall be deposited by the State Treasurer in a special account to be known as the Cancer Research Fund, except that for Fiscal Year 1983 only $500,000.00 shall be deposited in that account. Moneys in the Cancer Research Fund shall be annually appropriated toward the funding of the New Jersey State Commission on Cancer Research established pursuant to P.L.1983, c.6 (C.52:9U-1 et seq.), or to projects authorized and approved by the commission.
b. The sum of $6,000,000 of the tax collected pursuant to section 301 of P.L.1948, c.65 (C.54:40A-8), shall be deposited annually by the State Treasurer into the special projects and development fund established pursuant to section 7 of P.L.1966, c.36 (C.26:2F-7) for the law enforcement and educational purposes described in section 7 of P.L.1966, c.36 (C.26:2F-7). The amount specified in this subsection shall be deposited into the fund in two equal installments on November 30 and April 30 of each year.
c. The sum of $10,000,000 of the tax collected pursuant to section 301 of P.L.1948, c.65 (C.54:40A-8), shall be deposited annually by the State Treasurer into the Health Care Subsidy Fund established pursuant to section 8 of P.L.1992, c.160 (C.26:2H-18.58). The amount specified in this subsection shall be deposited into the fund in two equal installments on November 30 and April 30 of each year.
(cf: P.L.1990, c.39, s.18)
4. Section 7 of P.L.1966, c.36 (C.26:2F-7) is amended to read as follows:
7. (a) There is hereby established a special projects and development fund which shall consist of all funds appropriated or otherwise made available for the purposes set forth in this section. The commissioner, with the approval of the Public Health Council, may make grants from the special projects and development fund to local health agencies, to hospitals, and to voluntary health agencies to provide State health assistance for new health services and for special health projects in order to stimulate continued development of health services and to assure the citizens of New Jersey the benefits of the most advanced health protection techniques.
(b) [Grants] Except as provided in subsection © of this section, grants from the special projects and development fund for specific purposes shall be made on an annual basis for a period not in excess of 5 years and such grants shall be in diminishing amounts during this period. The commissioner shall determine the conditions applicable to each such grant including the extent of local financial participation to be required. Grants from the special projects and development fund to voluntary health agencies shall not exceed 40% of said fund.
(c) In addition to the purposes for which grants may be made pursuant to subsection (a) of this section and notwithstanding the restrictions on grants contained in subsections (a) and (b) of this section, the commissioner, with the approval of the Public Health Council, shall make grants annually from the special projects and development fund to local health agencies for the local efforts detailed in written grant applications submitted to the commissioner by such agencies to (1) enforce the prohibition in N.J.S.2A:170-51 against the sale or provision of cigarettes, cigarette papers and tobacco to persons under 18 years of age, or (2) to enhance or expand the materials used or the instruction provided on the tobacco component of the instructional program on the nature of drugs, alcohol, anabolic steroids, tobacco and controlled dangerous substances which is required to be taught in the public schools pursuant to section 1 of P.L.1987, c.389 (C.18A:40A-1), or for instructional programs for persons under the age of 18 years in locations other than public school facilities, or (3) both.
The amount of each grant awarded under this subsection shall be determined by the commissioner after a review of the grant application. The commissioner may impose such conditions as the commissioner deems necessary on the expenditure of a grant amount to ensure its proper and effective use. A grant made pursuant to paragraph (2) of this subsection shall not be used to replace any funds currently spent by a public school to fulfill the requirement of section 1 of P.L.1987, c.389 (C.18A:40A-1). The annual total of all grants made from the fund under paragraph (1) of this subsection shall not exceed $3,000,000, and the annual total of all grants made from the fund under paragraph (2) shall not exceed $3,000,000. Each local health agency receiving a grant shall submit a written report quarterly to the commissioner on the expenditure of grant funds and the status of the local efforts toward law enforcement or education for which the grant was made.
(cf: P.L.1966, c.36, s.7)
5. Section 8 of P.L.1992, c.160 (C.26:2H-18.58) is amended to read as follows:
8. There is established the Health Care Subsidy Fund in the Department of Health.
a. The fund shall be comprised of revenues from employee and employer contributions made pursuant to section 29 of P.L.1992, c.160 (C.43:21-7b), revenues from the hospital assessment made pursuant to section 12 of this act, revenues from interest and penalties collected pursuant to this act [and], revenues from such other sources as the Legislature shall determine and the amount of tax collected pursuant to section 301 of P.L.1948, c.65 (C.54:40A-8) and deposited annually by the State Treasurer into the fund in accordance with subsection c. of section 5 of P.L.1982, c.40 (C.54:40A-37.1). Interest earned on the monies in the fund shall be credited to the fund.
The fund shall be a nonlapsing fund dedicated for use by the State to: (1) distribute charity care and other uncompensated care disproportionate share payments to hospitals, and provide subsidies for the Health Access New Jersey program established pursuant to section 15 of this act; and (2) assist hospitals and other health care facilities in the underwriting of innovative and necessary health care services.
b. The fund shall be administered by a person appointed by the commissioner.
The administrator of the fund is responsible for overseeing and coordinating the collection and reimbursement of fund monies. The administrator is responsible for promptly informing the commissioner if monies are not or are not reasonably expected to be collected or disbursed or if the fund's reserve as established in subsection c. of this section falls below the required level.
c. The fund shall maintain a reserve in an amount not to exceed $20 million. The commissioner shall adopt rules and regulations to govern the use of the reserve and to ensure the integrity of the fund, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.).
d. The administrator shall establish separate accounts for the charity care component of the disproportionate share hospital subsidy, other uncompensated care component of the disproportionate share hospital subsidy, hospital and other health care initiatives funding and the payments for subsidies for insurance premiums to provide care in disproportionate share hospitals, known as the Health Access New Jersey subsidy account, respectively.
e. In the event that the charity care component of the disproportionate share hospital subsidy account has a surplus in a given year after payments are distributed pursuant to the methodology established in section 13 of P.L.1995, c.133 (C.26:2H-18.59b) and within the limitations provided in subsection e. of section 9 of P.L.1992, c.160 (C.26:2H-18.59), the commissioner may reallocate the surplus monies to the Health Access New Jersey subsidy account.
(cf. P.L.1995, c.133, s.4)
6. This act shall take effect immediately, but shall remain inoperative until January 1, 1996.
STATEMENT
This bill increases by $0.05 (from $0.02 to $0.07) the cigarette tax rate imposed on each cigarette, making the cigarette tax the equivalent of $1.40 per pack of 20 cigarettes commencing January 1, 1996. The bill also increases the cigarette tax rate by $0.01 every two years beginning on January 1, 1997, until the tax equals $0.14 per cigarette on January 1, 2011, making the final tax rate equal to $2.80 per pack of 20 cigarettes.
In addition, the bill increases by 60% (from a rate of 24% to a rate of 84%) the tax on the receipts derived from the sale of tobacco products (other than cigarettes) by a distributor or a wholesaler to a retail dealer or consumer. The corresponding compensating use tax on tobacco products is also increased to 84%. The bill also increases the tobacco products tax rate by adding 12% to the rate every two years beginning on January 1, 1997, until the tax rate equals 168%.
The purpose of this bill is to significantly increase the price of cigarettes and tobacco products, thereby reducing the demand for and use of these unhealthful products. Studies have shown that the single most effective way to reduce smoking and tobacco product use is to increase the price; this method is most effective in reducing smoking among teenagers. In the long term, a reduction in smoking and the use of tobacco products will result in improved societal health and significant savings in health care costs.
Initially, this bill will also significantly increase cigarette and tobacco products tax revenues for the State and these revenues will decrease only gradually over a period of many years. Experience in other states has shown that a substantial increase in the tax on cigarettes and tobacco products will bring in a proportional increase in revenue, even as the volume of cigarettes and tobacco products sold declines. The decline in the number of smokers and tobacco products users will occur gradually; therefore, a decline in tax revenues will also take place gradually.
In addition, the bill requires the State Treasurer to deposit $6 million of cigarette tax revenues into an existing special projects and development fund which the Commissioner of Health currently uses to make certain health-related grants. The commissioner would make grants to local health agencies, pursuant to written grant applications, to (1) enforce the prohibition in N.J.S.2A:170-51 against the sale or provision of cigarettes, cigarette papers and tobacco to a person under 18 years of age, or (2) to enhance or expand the tobacco component of the instructional program on the nature of drugs, alcohol, anabolic steroids, tobacco and controlled dangerous substances which is required to be taught in the public schools in grades kindergarten though 12, or for instructional programs for children under the age of 18 years in locations other than public school facilities. The commissioner would be limited to a maximum of $3 million in grants in each of these two categories.
Finally, the bill requires the State Treasurer to deposit $10 million annually from cigarette tax revenues into the Health Care Subsidy Fund, a nonlapsing and dedicated fund from which the State distributes charity care and other uncompensated care payments to certain hospitals.
Increases tax on cigarettes and other tobacco products; designates $16 million of cigarette tax revenues for certain purposes.