Senate fails to adopt committee report that recommends passage of tobacco tax hike bill

The Senate has failed to adopt its committee report that recommends the passage of its version of a House of Representatives bill that aims to increase government revenue by amending the definition of cigarettes to ensure that all tobacco products are properly taxed.

With four senators voting “yes” and four senators voting “no” to a motion to adopt the report of the Committee on Fiscal Affairs during a session Monday, Senate president Edith E. DeLeon Guerrero (D-Saipan) announced that the report will not be adopted and it is no longer in existence.

DeLeon Guerrero, Senate vice president Sen. Donald M. Manglona (Ind-Rota), Sens. Paul A. Manglona (Ind-Rota), and Celina R. Babauta (D-Saipan) voted for the adoption of the committee report.

Sens. Jude U. Hofschneider (R-Tinian), Francisco Q. Cruz (R-Tinian), Carl R. King-Nabors (R-Tinian), and Dennis James Mendiola (R-Rota) voted “no.”

Senate floor leader Sen. Corina L. Magofna (Ind-Saipan) was absent, but excused from the session.

The Fiscal Affairs Committee chaired by Donald Manglona recommends the passage of the proposed legislation in the form of House Bill No. 23-7, Senate Substitute 1.

House Bill No. 23-7 was formally introduced by Rep. John Paul P. Sablan (Ind-Saipan) on Feb. 3, 2023. The legislation proposes to increase the tobacco tax to $5 from $3.75.

The bill proposes to amend the definition of “cigarette” to include any product that resembles similarities to cigarettes based on its appearance, weight, usage, and packaging, such as “little cigars”, “filtered cigars”, or “roll-

your-own” tobacco, which is used for making cigarettes.

The bill was subsequently referred to the House Committee on Ways and Means for disposition. On May 10, 2023, the House passed the bill in its original form.

The bill was transmitted to the Senate and subsequently referred to the Committee on Fiscal Affairs for disposition.

The Senate Committee on Fiscal Affairs conducted public hearings on the bill last Jan. 19 on Tinian, last Feb. 5 on Rota, and last Feb. 15 on Saipan.

The committee finds that the enactment of House Bill 23-7, Senate Substitute 1, would potentially increase the cost of the government for additional training, public outreach, and enforcement to carry out the intent as proposed.

However, the committee believes that with the increase in excise taxes for cigarettes and tobacco product, revenue

generated through this increase has been allocated to address the necessary operational duties of respective departments and agencies, in addition to providing critical funding to the GHLI program, Medicaid-match, and the Health Network Program.

Among the amendments made by the committee, was to insert and delete language to expound the findings of the

legislation to illustrate the nexus between tobacco tax revenue with critical healthcare needs, as well as incorporating language to indicate support to enforcement agencies.

The committee agreed to the proposed amendment by the House the statute that updates the definition of “cigarette,” which was further amended to clarify that the definition of cigarette would not include tobacco products entirely wrapped with tobacco leaf that do not include a filter.

Before the voting, Hofschneider asked clarification from their legal counsel, Joe Bermudes, that just by adopting the committee report does not necessarily mean that they are “blessing the action.”

Hofschneider said he does have a very extreme reservation on having any tax increases in the midst of where the CNMI at today given the situation with inflation and everything that is associated with the cost of living here in the Commonwealth.

King-Nabors and Cruz also raised some concerns about the bill.

DeLeon Guerrero clarified that the statement of Hoschneider that the point of order is to adopt the standing committee report only not necessarily adopting the bill itself.

Bermudes said if the adoption of the committee report passes, it doesn’t hand carry the bill itself because the bill is going to be on the bill calendar under the discussion.

“I know there’s already a floor amendment on that bill,” Bermudes said.

He said with respect to adopting a committee report regarding appointees, those appointees are much confirmed.

The legal counsel said it’s different for bills.

“You may adopt the committee report and still make changes when the bill is in the bill calendar,” he said.

Bermudes said the final product will be under the discussion in the bill calendar.

“So voting yes on the committee report doesn’t mean it’s an automatic yes on the bill, and vice versa,” he said.

DeLeon Guerrero thanked Bermudes for explaining thoroughly that voting on the standing committee report does not carry the same over to the bill calendar on the cited bill.