Oklahoma measure proposes tax hike on smokeless tobacco to fund health programs

A proposal to increase the state tax on some forms of smokeless tobacco — moist snuff — to fund programs to recruit doctors to rural and underserved parts of the state is working its way through the Legislature.
Senate Bill 233 is expected to raise $8 million to $9 million a year for recruitment programs of the Physician Manpower Training Commission.

It would eliminate the current 20 percent tax on moist snuff and replace it with a $1.20 per ounce tax. A typical can of moist snuff contains a little more than one ounce. The tax hike would not apply to dry snuff, chewing tobacco, smoking tobacco, cigarettes or cigars.
Rep. John Enns, R-Enid, said the tax increase is needed to fund incentives for primary care physicians to move to parts of the state that don’t have enough basic medical care. That includes rural parts of the state and urban high poverty areas.
“We are so underserved in the rural areas. It is incredible,” said Enns, author of the proposal.
Rick Ernest, executive director of the Physician Manpower Training Commission, said budget cuts in recent years have hampered the agency’s ability to recruit doctors to rural Oklahoma.
The agency has three scholarship programs that pay off the college debt of physicians if they agree to work in small rural communities. Those programs have a strong record of success of recruiting doctors to rural areas and convincing them to stay there, but without funding, there isn’t much that can be accomplished, Ernest said.
“I can’t tell you what a shot in the arm (the tax’s new funding) would be for putting physicians out in rural Oklahoma,” he said.
Texas has used a similar tax for two years to recruit young doctors — including Oklahoma physicians — to rural part of that state, Ernest said. The Texas program raises $35 million a year and places about 250 physicians a year, he said.
His agency has a budget of about $3.7 million, but much of that money is committed to pay for residency training programs at the University of Oklahoma Health Care Center, OU-Tulsa and the Oklahoma State University College of Osteopathy Medicine. About $1 million a year goes into the physician recruitment program, he said.
“There’s a lot of people out there waiting for that money,” he said.
IN OPPOSITION
Rep. Doug Cox, R-Grove, is a physician and a big supporter of programs to recruit more doctors to rural areas, but he opposes the tax.
The bill is a “great quick fix” for funding physician recruitment, but the change from a price-based tax to a weight-based tax would lock down taxes on a dangerous product without any future adjustment for inflation.
A similar tax scheme has locked the state tax on alcohol since the 1970s, he said.
“While it’s a great quick fix for physician recruitment, I think my job is to look at the long-term future for the state of Oklahoma,” Cox said.
Cox said he would support a straightforward price-based tax hike or possible a weight-based tax, if it provided for automatic adjustments for inflation every few years.
The bill is expected to bring heavy lobbying from tobacco companies, although some are likely to be for it and others against it. Relatively expensive products would benefit from the flat rate change in the bill. Relatively inexpensive ones would benefit from a price-based tax.
A spokesman for Gov. Mary Fallin said she has not made a commitment on the proposal.
“Governor Fallin is waiting to see how SB 233 evolves as it makes its way through the legislative process,” said Alex Weintz. “She is reviewing with staff the fiscal impact of the bill as well as the bill’s potential impact on rural physicians.”