Taxing moist snuff by weight ain’t worth spit
Publication Source

Tobacco Control

Journal article
The Americas
Economy status
High-income economies

Moist snuff has been traditionally taxed in US states using an ad‐valorem tax (ie, percentage of price).1 There is a movement afoot to change the taxation of moist snuff, from an ad‐valorem to a weight‐based system, and appears to be primarily promoted by US Smokeless Tobacco (UST).2,3 Effective 1 August 2006, moist snuff in New Jersey, previously taxed at 30% of the wholesale price, is now taxed by weight. The key rationale for the change was to reduce youth access to these products, on the basis of the assumptions that cheaper products are more attractive to youth and market share of these cheaper (ie, deep‐discount) brands has grown considerably. The new tax, suggested to raise an additional $2 million in revenue, was introduced during the state’s struggle to balance the FY2007 budget.

We showed that the policy is flawed, fiscally and philosophically. Using ACNielsen data for New Jersey sales of moist snuff, we estimated tax revenue on the basis of consumption patterns using the old and new tax formulas. The 1.2 ounce comprised 90% of the moist snuff market and UST dominated, particularly in the premium product category, which made up 96% of sales. As the new taxation policy does increase the excise tax on deep‐discount brands, it reduced tax revenues from premium products (table 1​1).). A commonly held tenet in tobacco control is that increases in excise taxes result in reduced consumption and increased revenues.4 However, even if we assume New Jersey consumption stays static, the new tax will not only fall short of the projected additional revenue, but also generate less revenue than under the previous ad‐valorem tax. Given the dominance of premium products in the market, consumption of these products would have to increase to prevent a loss of revenue.