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 legislation and regulation, the same issues are on the table. 

During the 2021 congressional session, Congress considered a budget reconciliation bill that included significant increases in the federal tax rates for cigarettes and other tobacco products (OTP). Those increases were since removed from the bill, which has yet to be considered by the full U.S. 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 industrywide effort, those increases were deleted from the legislation," Thomas Briant, executive director of the National Association of Tobacco Outlets (NATO), said during a recent industry presentation delivered as part of the 2022 Tobacco Plus Expo (TPE). 

TPE 2022 International is taking place as a hybrid event this year, with TPE Ignite online educational series occurring Jan. 10-14. 

According to Briant, changes under the congressional proposal included:

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

"The takeaway from this congressional attempt to raise tobacco taxes is that it could happen again," Briant cautioned. "Federal tax rates were last raised in 2009 — that's some 13 years ago. It is important to remain watchful for future congressional moves to raise tobacco tax rates, even though the legislation has not passed Congress as of yet."

The need to remain vigilant to any potential change to the federal tax rates is evidenced by the potential economic impact. According to a NATO-commissioned economic impact study, levy increases would have resulted in $801 million in lost sales, 14,000-plus lost jobs, and $1.26 billion in lost state cigarette and OTP tax revenue.

FDA Moves

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

The FDA has the authority to adopt product standards without further congressional action.

Even though the product standards are due to come out in three months, the entire process takes time, Briant said, outlining that the agency needs to follow a nine-step process that includes drafting the new regulation, submitting it to the White House Office of Management and Budget, requesting public comments, and finalizing the rule with an implementation date.

"The time it takes a federal agency to go through each of those steps before new regulation can go into effect is generally a couple of years," he said. "It means that the prohibition of menthol in cigarettes and flavored cigars will not occur in the near-term, but could take a couple of years."

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

Other FDA moves on the tobacco regulatory front are:

• New graphic warnings for cigarette packaging and advertising, which are currently slated to go into effect on Jan. 9, 2023;
• Review process of premarket tobacco product applications, which the agency extended past 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 & Local Moves

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

Maryland was the only state that implemented a tobacco tax increase in 2021, even though that cigarette and OTP increase was adopted in 2020 and vetoed by Gov. Larry Hogan the same year. The state legislature returned in 2021 and overrode Hogan's veto, setting the stage for the levy hike to take effect last year.  

Aside from cigarette taxes, approximately 13 states failed to pass a vapor tax in 2021. Approximately 12 states have pending vapor tax proposals.

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

"None of these bills passed in 2021. Even so, it is evident that given the increase in the number of states that are even considering flavor bans, we'll likely see more flavor ban bills being considered this year," he said.

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

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