On Thursday, the House Ways and Means Committee heard testimony on the Department of Revenue (DOR) bill, SB 382 (Various Tax Matters), authored by Sen. Travis Holdman (R-Markle). This is the measure that was amended to include an ill-advised reduction to the tax on vaping products (a tax just established last year that hasn’t even gone into effect yet). It drops the wholesale tax on vaping products from 25% to just 15%. That’s a 40% reduction in the tax on the very products that drive youth to nicotine addiction. The bill also includes provisions that favor the vaping industry and limit the tax on cigars. These provisions all serve only to encourage, rather than discourage, the use of products that are detrimental to the health of our citizenry and workforce – and drive up health care costs for employers.
The Chamber stood with other health-centered organizations to strongly oppose these changes. Last year’s legislation was attempting to achieve a parity in the level of taxation of these products with the taxation of traditional tobacco products – namely cigarettes. The changes to this bill made in the Senate represent a big step backwards from that objective by treating them more favorably than cigarettes. Our opposition is based on data that demonstrates a link between usage of these other products and increases in cigarette smoking and addiction.
The Chamber did support a couple provisions in the legislation that are directly related to the true purpose of an agency bill; in this case, that is to make changes that improve the ability of DOR to efficiently administer tax collections. It is a weighty bill, and within its many provisions are two that accomplish that traditional purpose. It refines the treatment of state adjustments necessary due to federal audits of partnerships and provides a new option for partnerships regarding the withholding requirements applicable to non-resident partners. These are both welcomed and beneficial to the taxpaying community.
Senate Bill 382 was held to allow the committee more time to consider amendments. As an agency bill, it is almost certain to ultimately pass in some form. But the big question is how they will deal with the taxation of vaping, cigars and the newer tobacco alternative products. The Chamber will of course remain very engaged as it is amended and most probably goes into conference committee discussions in a few weeks.
Bill Waltz is vice president of taxation & public finance for the Indiana Chamber. He is also an attorney and has been with the organization since 2004.
