Lawmakers in Louisiana and Oklahoma are moving to reform how moist snuff tobacco (MST) is taxed, shifting from a price-based model to a weight-based one. This change aims to create a more stable, neutral, and principled tax structure for non-cigarette tobacco products.
The Proposed Legislative Changes
Two key bills are currently under consideration to overhaul MST excise taxes:
-
Louisiana (HB 782): Proposes shifting the tax from 20% of the wholesale price to a flat 59 cents per ounce.
-
Oklahoma (HB 3983): Proposes converting the current 60% wholesale tax into a specific weight-based tax of $1.72 per ounce.
Why Weight-Based Taxes are More Effective
Taxing tobacco based on weight rather than price (ad valorem) offers several advantages for both the state and the consumer:
-
Revenue Stability: Price-based taxes are volatile; if market prices drop or companies offer discounts, tax revenue falls. Weight-based taxes ensure that the state collects the same amount of revenue regardless of market fluctuations.
-
Market Neutrality: Under a price-based system, a premium $5.00 can of snuff is taxed significantly higher than a $2.50 discount brand, even if they contain the same amount of tobacco. A weight-based tax treats both products equally, preventing the tax code from picking “winners” or “losers” based on price point.
-
Simplicity: Calculating tax based on physical volume or weight is generally more straightforward for auditors and businesses than estimating fluctuating wholesale values.
Comparison: Price-Based vs. Weight-Based (Oklahoma Example)
Using a standard 1.2-ounce can:
| Product Type | Wholesale Price | Current 60% Tax | Proposed $1.72/oz Tax |
| Premium Snuff | $5.00 | $3.00 | $2.06 |
| Discount Snuff | $2.50 | $1.50 | $2.06 |
The Logic of Excise Taxation
Traditionally, excise taxes are designed to “internalize externalities”—essentially, pricing in the social or health costs associated with a product.
-
Targeting the Harm: For products like alcohol, taxes often scale with alcohol content (proof). For energy, carbon taxes target emissions.
-
The Nicotine Dilemma: Unlike alcohol or carbon, nicotine itself does not have a singular, easily targeted external harm metric. Therefore, the most logical “proxy” for consumption is the quantity of the product used (the weight of tobacco or volume of vapor) rather than its retail price.
National Context
If passed, Oklahoma’s proposed rate of $1.72 per ounce would rank as the fifth-highest weight-based MST tax in the U.S., notably higher than the national average of $1.18 per ounce. Currently, 23 states have already adopted weight-based systems, ranging from Alabama ($0.02 per package) to Maine ($3.54 per ounce).
Conclusion
While Oklahoma’s fiscal analysis suggests the change will be revenue-neutral, the move represents a shift toward a more “principled” tax code. By focusing on the quantity of the product rather than its price, Louisiana and Oklahoma are looking to create a more predictable and fair environment for tobacco excise collections.