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$320 Million Tobacco Tax Package Thunders Back To Life With Voter Referral Add

Oregon's House of Representatives passed a bill to restore double health insurance for public employees in June 2019. | ELON GLUCKLICH/THE LUND REPORT.
June 13, 2019

SALEM – Gov. Kate Brown's $320 million tobacco tax package, considered by many observers to be on life support just a week ago, has roared back into the spotlight in the legislative session's final days.

The House Committee on Revenue passed House Bill 2270, a proposed $2 per pack tax hike on cigarettes and a new e-cigarette tax, on a 5-2 vote Thursday morning, sending it to the Joint Committee on Tax Expenditures, which could vote the bill to the House floor as early as Friday. Lawmakers say the bill is now on a fast track with the session's June 30 adjournment date looming.

“We never gave up and we never gave in,” Brown said after the vote Thursday morning. “I’m pleased to see the committee work that’s happening.”

The House Committee on Revenue vote came after Democratic leadership Wednesday evening posted a notice of an 8 a.m. Thursday work session on the package in the revenue committee. Previously, the committee hadn't taken up the bill, considered one of Brown's top health care priorities, since early April.

But the bill received a significant change in the two months it sat dormant: Now, none of the taxes will take effect until Oregon voters have a say next year.

An amendment posted Wednesday evening stipulates that HB 2270 will be subject to voter approval next general election in November 2020. Passage in that election would put the taxes into law January 2021. The original version of the bill would have implemented the taxes next year without voter approval – though some opponents of the taxes had vowed to refer to it the ballot.

The taxes are a key element of Brown's self-described four-pillar plan to plug an Oregon Health Plan funding gap that stood at $930 million at the start of this year's legislative session. The gap comes at a time when Oregon and other states that expanded Medicaid under the Affordable Care Act are preparing to take on the full cost burden of the expansion for the first time next year.


“This funding is instrumental for the Oregon Health Plan, as well as (smoking) cessation and prevention efforts around the state,” Brown said. “I think there’s a broad coalition behind the bill, and I’m really pleased the Legislature is at least considering it at this point.”

Taxes on hospitals and insurance premiums easily passed into law early this session and are projected to fill about half of the Medicaid funding gap. But the failure of a $120 million tax on large employers that don't pay for health care for their employees has put added pressure on the state's general fund to maintain benefits for the roughly 1 million people who receive their health insurance through the Oregon Health Plan.

Several Republicans on the House Committee on Revenue blasted Democrats for rushing the bill and for voting Thursday without full a breakdown on projected revenue raised by the bill's $2 per pack increase on cigarettes, the new tax on vaping products and the ban of single cigars cheaper than $3.

"This is a gut-and-stuff," Rep. E. Werner Reschke, R-Klamath Falls, said. "There's been no public hearing. Without a public hearing, we make a mockery of the process." The committee held two public hearings on the bill in early April, but without the recently drafted amendments – largely minor changes except for the ballot referral.

Other Republicans questioned the state's projections that the taxes would raise an estimated $160 million per year. They also asked why a bill seeking to curtail smoking didn't also tax marijuana – though it is taxed separately under state law.

"I'm appalled that we should be voting on a bill that will raise an undetermined amount of revenue, and we can't tie it in to where it's coming from," Rep. Lynn Findley, R-Vale, said. "Obviously we're not trying to curb behavior, we're just raising taxes."

Committee Democrats argued the taxes can promote smoking cessation and raise revenue for low-income Oregonians at the same time.

"My intention in supporting the bill is the potential we have to have significant health impacts by raising the taxes on cigarettes," said Rep. Pam Marsh, D-Ashland, listing teenage smoking rates and the correlation of price increases with decreases in use. "Let's do what we can to use tax policy to affect health policy. If it raises money, it's appropriate to put it into (smoking) cessation and the Oregon Health Plan. There's a very strong nexus there."

Have a tip about the health-care industry or legislation? You can reach Elon Glucklich at [email protected].