Legislative leaders indicate the tobacco tax increase Governor Kim Reynolds proposed does not have enough support among her fellow Republicans to win approval in the legislature, but Senate Republican Leader Mike Klimesh is indicating another part of the governor’s plan merits consideration.
“In the Senate right now we’re having conversations about taxing nicotine alternative products like pouches and vapes,” Klimesh said during a news conference late last week. “…If you look at Iowa’s level of taxation on those products relative to surrounding states we’re extremely low.”
Vaping supplies are currently subject to Iowa’s 6% sales tax. Governor Reynolds has proposed a 15% tax on so-called c-cigarettes or “vapes” and the liquids that turn into vapors that deliver the nicotine hit. “That market is continuing to grow as an alternative to smoking so I think we’ll kind of eyeball that right now, you know, as a potential opportunity for us to provide additional revenues in the Medicaid space,” Klimesh said.
The House last week passed another alternative to address a deficit in Iowa’s Medicaid program. it’s a temporary premium tax increase on HMOs with Iowa customers as well as the private companies that manage care for Iowa Medicaid patients. House Speaker Pat Grassley told reporters that was a difficult decision to make.
“We don’t like to be in a position to have to raise any sort of tax,” Grassley said during his weekly news conference. “We felt since it was something that wasn’t permanent and we had to help get through that budget shortfall for Medicaid, we felt it was not unreasonable.”
Grassley said there are a lot of other tax ideas floating around Iowa’s Capitol. “Whether it’s in some of the other bills that you’re seeing with the gas tax, looking at the tobacco tax. There’s been bills out there with gaming taxes,” Grassley said. “…As Republicans, we’re trying to be mindful that’s not the things we ran on. Those aren’t typically the issues we like to pivot to, but that being said there’s a lot of session left. I don’t know what it ends up looking like, ultimately, in our final negotiations.”
Grassley has indicated he hopes the legislature concludes its work before April 21. Governor Reynolds has said raising the cigarette tax is one way to respond to alarming lung cancer rates in the state and reduce smoking and a gas tax hike is included in the property tax plan Senate Republicans have proposed.