2022 could prove to be another active year for tobacco legislation

NATIONAL REPORT — It may be a new year, but when it comes to tobacco laws and regulations, the same issues are on the table.

During the 2021 session of Congress, Congress considered a budget reconciliation bill that included significant increases in federal tax rates on cigarettes and other tobacco products (OTPs). Those increases have since been removed from the bill, which has yet to be considered by the full US Senate.

“Even though the tax increases are no longer in the bill, it is important to understand how significant the increases would have been, and because of the industry-wide effort, these increases have removed from the legislation,” Thomas Briant, executive director of the National Association of Tobacco Outlets (NATO), said during a recent industry presentation as part of the 2022 Tobacco Plus Lounge (TPE).

TPE 2022 International is taking place as a hybrid event this year, with the TPE Ignite online educational series running from January 10-14.

According to Briant, the changes made by the Congressional proposal included:

  • A 100% increase in the federal tax on cigarettes, from $1.01 per pack to $2.02;
  • The large cigar tax would have changed in two respects: one of the changes was a tax in the dollar amount of $49.56 per pound. and the other would have implemented a minimum tax of at least 10 cents per cigar;
  • The snuff tax would increase by 1,700% to $26.84 per pound; and
  • A tax has been proposed on modern oral nicotine and vapor products, at $1.15 per pod or $4.45 per pack of 20 sachets or lozenges.

“The takeaway from this congressional attempt to raise tobacco taxes is that it could happen again,” Briant warned. “Federal tax rates were last increased in 2009, which is approximately 13 years ago. It is important to remain alert to future Congressional action to increase tax rates on tobacco, even though the legislation has not yet been passed by Congress.”

The need to remain vigilant to any potential changes to federal tax rates is underscored by the potential economic impact. According to an economic impact study commissioned by NATO, the tax increase would have resulted in lost sales of $801 million, the loss of more than 14,000 jobs and a loss of $1.26 billion in revenue cigarette taxes and OTPs.

FDA moves

The past year has also been a busy one for the Food and Drug Administration (FDA). The agency announced that it would propose product standards by April 2022 and that these standards would ban the use of menthol in cigarettes and flavorings in cigars.

The FDA has the power to adopt product standards without further action from Congress.

Even though the product standards are due to be published in three months, the whole process takes time, Briant said, noting that the agency must follow a nine-step process that includes drafting the new regulations, submitting them to the Bureau from the White House of Management and Budget, seeking public comment and finalizing the rule with an implementation date.

“The time it takes for a federal agency to go through each of these steps before a new regulation can take effect is usually a few years,” he said. “This means banning menthol in flavored cigarettes and cigars will not happen in the short term, but could take a few years.”

Any litigation after the final settlement would delay it even further, Briant added.

Other FDA actions on the tobacco regulatory front include:

  • New graphic warnings for cigarette packaging and advertising, which are currently expected to come into effect on January 9, 2023;
  • Pre-market tobacco product application review process, which the agency extended beyond the court-ordered Sept. 9, 2021, deadline under enforcement discretion; and
  • The agency’s recent announcement that it will regulate synthetic nicotine products on a case-by-case basis.

State and local removals

Moving to the state level, 10 states considered tobacco tax bills that were ultimately defeated in 2021. About 15 states have tax bills pending if the state legislature is still in session or if they are going to be postponed until 2022. These bills are still alive, according to NATO.

Maryland was the only state to implement a tobacco tax increase in 2021, although this cigarette and OTP increase was passed in 2020 and vetoed by Governor Larry Hogan the same year. The state legislature returned in 2021 and overruled Hogan’s veto, clearing the way for the levy hike to go into effect last year.

Besides cigarette taxes, about 13 states have not passed a vapor tax in 2021. About 12 states have pending vapor tax proposals.

Several states have also sought to restrict or ban the sale of flavored tobacco products in 2021, according to Briant. The numbers show the measures have failed in about 10 states, but are pending in about 10 other states.

“None of these bills passed in 2021. Even then, it’s obvious that given the increase in the number of states that are even considering banning flavorings, we’re likely to see more bills. flavor ban bill this year,” he said.

Drilling down to the municipal level, the most active states for local tobacco ordinance activity are currently California, Colorado, Minnesota, Oregon and Virginia.

TPE 2022 International is running as a hybrid event this year, with a live trade show taking place January 26-28 in Las Vegas, and the TPE Ignite online educational series taking place January 10-14. All of this year’s educational sessions are live on the TPE Facebook page and will be available later on the TPE YouTube channel.

About Margaret Shaw

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