AUGUSTA — Maine would tax vaping products the same way it taxes tobacco products if lawmakers approve a bill that cleared a legislative committee on a party line vote late Thursday.

In a separate vote, also along party lines, the Taxation Committee endorsed a bill that would subject more of an inheritance to the estate tax, undoing a tax reduction passed under former Gov. Paul LePage.

Both bills now face action on the floor of the Legislature. If passed, they also must be signed by Gov. Janet Mills, who has said she will not raise taxes during her first two years in office – although it’s not clear whether these measures would meet her definition of a tax increase.

The vaping bill, which Democrats supported and Republicans opposed, would increase the current excise tax on non-cigarette tobacco products, including vaping products, to 43 percent of the wholesale cost. Maine’s current law sets that tax at 20 percent.

The House chairman of the committee, Rep. Ryan Tipping, D-Orono, said the bill is meant to equalize taxes on tobacco products and is a pared-down version of the initial measure.

The initial bill would have increased the tax on a pack of cigarettes from $2 a pack to $3.50 a pack, applied the tobacco tax to vaping products and increased the excise tax on those products from 20 percent to 81 percent of wholesale cost. That bill would have generated an estimated $12 million a year for the state in tax revenue.

Estimates on what the pared-down bill would generate in taxes have not yet been calculated, but Tipping said much of the new revenue would go toward a fund that is used for tobacco cessation and prevention programs or toward state costs for cessation counseling for patients on the state’s Medicare program, MaineCare.

“That would still put us at 20 percent less than our neighboring New Hampshire for these products,” Tipping said of the tax increase, noting that New Hampshire also is considering legislation to apply a tobacco tax to vaping products.

The bill is another attempt by lawmakers this year to help curb an uptick in youth smoking and the increasing vaping rates in Maine. Earlier this year, the Legislature approved a bill that banned vaping in public schools statewide.

Health advocates, including Hillary Schneider, the director of government relations for the American Cancer Society Cancer Action Network in Maine, said they see the bill as a health measure. Schneider said increasing the costs of tobacco and tobacco-related products including e-cigarettes and vaping devices is a proven strategy in reducing use of the products among young people.

Republicans on the committee voted against the bill. They said it was clearly a tax increase, it couldn’t be applied to tobacco products purchased online and it might not have the intended effect of reducing smoking rates, especially among youth.

“This bill is just going after Maine business,” said Rep. Bruce Bickford, R-Auburn.

Others said the bill was largely meant to set a more uniform tax rate for cigarettes and other tobacco-related products.

“I’ll be voting against this bill for the simple reason it is still a tax increase,” said Rep.Trey Stewart, R-Presque Isle. “And I look forward to seeing the governor’s veto on this bill.”

Sen. Heather Sanborn, D-Portland, sees the bill differently.

“I believe we are closing a tax loophole due to new technology and new ways of delivering nicotine to our children,” she said.

The committee also split along party lines on the bill to reduce Maine’s estate tax exemption. Under current state law, the first $5.6 million of an inheritance is exempted from income taxes. But the committee voted 8-3 to reduce that exemption to the first $2 million. Under LePage, Maine increased the estate tax exemption to keep pace with the federal amount until the Republican-led Congress and President Trump doubled the exemption to more than $11 million in 2018 as part of the tax-cut package.

State tax officials estimate the change on average would generate about $28.5 million in revenue each year. The current $5.6 million exemption generated $13.8 million for the state in 2018.

Opponents of the bill, all Republicans, said the $2 million threshold was too low and would affect small businesses, especially farmers and fishermen.

Rep.Theodore Kryzak, R-Acton, said farmers and fishermen in Maine often have land that has high value but doesn’t generate income.

“There are lobstermen who have oceanfront land but they only have it for a dock, and the dock is there for the lobster boats and it’s passed down from family to family,” he said, noting that each subsequent generation is taxed for inheriting the family business.

“I worry about people who may be land or building rich or property rich,” said Bickford, the Auburn Republican. “Not all estates are money in the bank, some are working farms.”

But the committee’s chairman, Sen. Ben Chipman, D-Portland, pointed out that the estate tax exemption was set at $2 million as recently as 2015 and was even lower before then.

“And there weren’t lots of people losing property and it didn’t seem like the sky was falling or there were lots of people going bankrupt because of this, so I think it would be quite fine if we brought it back to the $2 million mark, I think everything would be all right,” he said.

 

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