increasing the tobacco excise tax a public health win a budget win a political win a win, win, win...

INCREASING THE INCREASING THE TOBACCO EXCISE TAXTOBACCO EXCISE TAX

A PUBLIC HEALTH WINA PUBLIC HEALTH WIN

A BUDGET WINA BUDGET WIN

A POLITICAL WINA POLITICAL WIN

A WIN, WIN, WIN FORA WIN, WIN, WIN FOR<STATE><STATE>

• Tobacco is the leading preventable cause of death, killing more than 400,000 each year

• Tobacco kills more people than from AIDS, alcohol, car accidents, murders, suicides, and fires combined

• Tobacco results in $96 billion in annual health care costs

• Nearly 90% of lung cancer cases, 1/3 of total cancer deaths, and 1 in 5 deaths from heart disease are tobacco related

Tobacco’s Toll in U.S.

• 3,500 kids try their first cigarette every day

• About 1,000 more kids become regular daily smokers every day; one-third will die from smoking-related diseases

• 20.0% of high school students smoke

• 25.7% used some tobacco product in the last month

• 20.6% of adults currently smoke

Tobacco’s Toll in U.S.

IN <STATE>

• XX tobacco-related deaths annually

• XX kids try first cigarette each year

• XX additional kids become regular daily smokers every year

• XX kids alive today will die from tobacco use

• XX% of <STATE> high school students are current smokers

• XX% of high school males are current spit tobacco users

IN <STATE>

• $XX billion in annual health care costs related to tobacco use

• $XX million in Medicaid costs alone

• <STATE> taxpayers pay $XX per household to treat tobacco related disease

TOBACCO EXCISE TAXES

• A win for public health

• A win for state budgets

• A win among voters

“The single most direct and reliable method for reducing consumption is to increase the price of tobacco products, thus encouraging the cessation and reducing the level of initiation of tobacco use.”

Taking Action to Reduce Tobacco UseNational Academy of SciencesInstitute of Medicine1998

“It is clear that price has a pronounced effect on the smoking prevalence of teenagers and that the goals of reducing teenage smoking and balancing the budget would both be served by increasing the Federal excise tax on cigarettes.”

Myron JohnsonPhilip Morris Research Executive1981

MANY OTHERS AGREE

• U.S. Surgeon General

• National Cancer Institute

• U.S. Centers for Disease Control & Prevention

• Task Force on Community Preventive Services

• President’s Cancer Panel

• Institute of Medicine of the National Academies

• World Bank

• World Health Organization

• Wall Street Tobacco Analysts

Total Cigarette Prices and Cigarette Sales

17000

19000

21000

23000

25000

27000

29000

31000

1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006

Sal

es (

mill

ion

pac

ks)

$1.50

$2.00

$2.50

$3.00

$3.50

$4.00

$4.50

Pri

ce (

Jan

. 200

7 d

olla

rs)

Sales Price

"This is the tipping point," Voelz said. "People are saying, 'I know they are going to keep increasing the cigarette tax, so I'm going to quit.' “

State Health Commissioner Dr. Judy Monroe wanted an even higher cigarette tax.

The data are clear, Monroe said: More smokers will quit as the price of cigarettes rises. Although lawmakers increased Indiana Tobacco Prevention and Cessation's budget this year by more than $6 million, to $16.2 million, that amount is less than the $35 million recommended by the Centers for Disease Control and Prevention for an effective anti-smoking program.

The tax is expected to bring in $206 million by 2009; $1.2 million of it will go to Indiana Tobacco Prevention and Cessation.

Gov. Mitch Daniels, Sneegas and Monroe on Wednesday announced a new anti-smoking campaign aimed at helping adult Hoosiers quit.

The $380,000 plan, titled "There's never been a better time to quit," is a statewide blitz encouraging doctors to advise their patients to quit smoking and directing smokers to local resources that can help them quit.

Daniels said the tax hike will have an immediate and lasting effect on Hoosiers."The biggest impact of a higher price is on dissuading young people or nonsmokers from taking it up in the first place," Daniels said.

Call Star reporter Michael Malik at (317) 444-6253.

Tax hike could be habit-breakingOfficials expect 23,000 Hoosiers to quit smoking, almost 40,000 youths not to start

July 1st, 2007Michael Malik

Mary Ann Morrett has had enough. The 44-cent tax increase on cigarettes that goes into effect today made her two-pack-a-day habit too expensive. She's going to quit.

"I can save myself some money by quitting smoking," Morrett said.

Morrett, 56, Indianapolis, is just one of the expected thousands who will quit smoking because the tax increase makes it unaffordable.

Based on two decades of federal data, state officials expect 23,000 Hoosiers to kick the habit in the next year because it is too expensive. Nearly 40,000 youths won't start smoking because of the increase.

Those numbers are a small fraction of the 1.5 million Hoosiers, including 1.1 million adults, who smoke. Indiana had the fifth-highest smoking rate in the nation in 2006, an improvement from the previous year, when the state ranked second.

Karla Sneegas, executive director of Indiana Tobacco Prevention and Cessation, said the smoking rate declined because so many communities -- 33 across the state -- passed sweeping anti-smoking ordinances.

The estimated number of people who quit reduced the state's smoking rate by a percentage point, Sneegas said.

The tax hike, to 99.5 cents per pack from 55.5 cents, will primarily fund health care for the state's working poor and childhood immunizations. But officials hope it will have the added benefit of persuading Hoosiers who smoke to quit.

Peggy Voelz, who coordinates cessation programs in Bartholomew County, said inquiries from smokers wanting to take a cessation class are up by one-third.

“I can save myself some money by quitting smoking,” Morrett said.

“This is the tipping point,” Voelz said. “People are saying, ‘I know they are going to keep increasing the cigarette tax, so I’m going to quit.’”

The data are clear, Monroe said: More smokers will quit as the price of cigarettes rises.

Stagnant Prices; Stagnant Smoking Rates

• Youth:

– Between 1997 and 2003, avg. U.S. price rose by 90.5% and high school smoking declined by 40%.

– Between 2003 and 2007, avg. price increased by 13%, and high school smoking decreased by 9%.

• Adult:

– Between 1997 and 2003, price rose by 90.5%, and adult smoking declined by 12.5%.

– Between 2003 and 2008, price increased by 17.1%, and adult smoking declined by about 4.6%.

Effects of a 10% Increase in the Price of Tobacco

• Nearly 7% decline in youth prevalence

• A 2% decline in adult prevalence

• A 4% decline in overall consumption

Tobacco Taxes are Most Effective with:

• Kids

• Pregnant Women

• Lower Income Populations

Tobacco Taxes & Pregnant Women

10% increase in price produces 7% decline in smoking

This is 3-4 times the effect as among smokers in general

XX% of pregnant women in <STATE> smoke cigarettes

Stopping Smoking During Pregnancy Means:

• Fewer low birthweight babies and attendant health problems

• Immediate medical cost savings for caring for low birthweight babies

• Fewer cases of spontaneous abortion, neonatal mortality, and SIDS

• Less exposure of babies to secondhand smoke

“Some women would prefer having smaller babies.”

-- Joseph Cullman, then Board Chairman, Philip Morris, Jan 3, 1971

Importance of Funding Tobacco Prevention with Part of Tax

• Combination of tax increase and prevention program will be most effective in reducing smoking.

• Industry price cuts and promotions (i.e., 2-for-1 offers, etc.) can undercut tax impact, so program is essential to success.

0%

5%

10%

15%

20%

25%

2001 2002 2003 2004 2005 2006 2007

Adult Smoking Prevalence in Washington State(BRFSS)

State cigarette tax increase to $2.025 per pack on 7/1/05.

State cigarette tax increase to $1.425 per pack on 1/1/02.

22.6%

16.5%

State smoke-free law went into effect on

12/8/2005.

The state tobacco prevention program has been consistently well-funded since it was implemented in 2000.

Benefits of a $1.00 Tax Increase in <STATE>

• XX fewer future youth smokers

• XX fewer adult smokers

• Saving XX deaths from a smoking-caused death

Tobacco Taxes & State Revenues

• Despite inevitable declines in cigarette consumption …

• Increasing tobacco taxes ALWAYS increases state revenues

Tobacco Taxes, Packs Sold,and State Revenues

State Date Increase Amount

State Decline in Packs

Nat’l Decline in Packs

Revenue Increase

New Revenue

IA 2007 $1.00 -30.6% -4.7% + 140.2% $128.0 M

MD 2008 $1.00 -27.1% -4.2% + 45.8% $126.9 M

SD 2007 $1.00 -25.8% -5.0% + 115.4% $31.8 M

TX 2007 $1.00 -21.0% -5.0% + 191.7% $1.0 B

WI 2008 $1.00 -15.0% -4.2% + 93.9% $283.0 M

The Texas Tax ExperienceFrom $0.41 to $1.41 on 1/1/07

0

200

400

600

800

1000

1200

1400

1/2006 - 12/2006 1/2007 - 12/2007

- 21.0%Packs Sold

$0

$400

$800

$1,200

$1,600

1/2006 - 12/2006 1/2007 - 12/2007

Revenues Collected

+ 191.7%

$523.4 Million

$1.5 Billion1.2 Billion

1.0 Billion

Orzechowski & Walker, The Tax Burden on Tobacco monthly reports

The Maine Tax ExperienceFrom $1.00 to $2.00 on 9/19/05

0

25

50

75

100

9/2004 - 8/2005 9/2005 - 8/2006

- 12.3%Packs Sold

$0

$50

$100

$150

$200

9/2004 - 8/2005 9/2005 - 8/2006

Revenues Collected

+ 76.5%

$93.5 Million

$165.1 Million

93.5 Million

82.0 Million


The Montana Tax ExperienceFrom $0.70 to $1.70 on 1/1/05

0

20

40

60

80

1/2004 - 12/2004 1/2005 - 12/2005

- 42.0%Packs Sold

$0

$25

$50

$75

$100

1/2004 - 12/2004 1/2005 - 12/2005

Revenues Collected

+ 36.5%71.0 Million

41.2 Million $51.3 Million

$70.1 Million


Tobacco Taxes & Revenues

• Stable; smoking declines are gradual

• Predictable; much easier to estimate than personal or corporate income tax revenues

• Adjustable; any declines can be offset by additional increases

• Produce health cost savings; declines in consumption offset by savings in health costs

Massachusetts Cigarette Tax Revenues, 1990-2009

(in millions)

$0

$100

$200

$300

$400

$500

$600

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Rate increased by 75¢ to $1.51 per pack

on July 25, 2002.

Rate increased by 25¢ to 51¢ per pack on January 1, 1993

Rate increased by 25¢ to 76¢ per pack on October 1, 1996.

Rate increased by $1.00 to $2.51 per

pack on July 1, 2008.

Orzechowski & Walker, The Tax Burden on Tobacco, 2008, and monthly reports

Maryland Cigarette Tax Revenues, 1990-2009

(in millions)

$0

$50

$100

$150

$200

$250

$300

$350

$400

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Orzechowski & Walker, The Tax Burden on Tobacco, 2008, and monthly reports

Rate increased by 34 cents to $1.00 per

pack on June 1, 2002.

Rate increased by 30 cents to 66 cents per pack on July 1, 1999.Rate increased by 3

cents to 16 cents per pack on June 1, 1991.

Rate increased by 20 cents to 36 cents per pack on May 1, 1992.

Rate increased by $1.00 to $2.00 per pack

on January 1, 2008.

Benefits of a $1.00 Tax Increase in <STATE>

• $XX million in new tobacco tax revenues

• $XX million in 5-year savings from reducing smoking during pregnancy and reduced heart attacks and strokes

• $XX billion in long-term healthcare savings from smokers averted

• $XX million in long-term state Medicaid program savings from smokers averted

Tax Evasion Issues

• There will be some, especially initially, but it will die down

• Revenue estimates take this into account

• Additional tax revenue far offsets any tax losses from crossborder sales, etc.

• Health and other benefits far outweigh these issues

• Most cigarettes purchased by the pack, not the carton

• Can take measures, like new stamps, that will reduce tax evasion and generate additional revenue

State Cigarette Tax Rates

• Average cigarette tax rate: $1.34 per pack• 2 states with a tax rate at $3.00+ per pack:

• Another 13 states with tax rates at $2.00+ per pack:

• Another 13 states have tax rates of at least $1.00 per pack:

AlaskaArizonaWashington, DC

HawaiiMaineMaryland

MassachusettsMichiganNew Jersey

New YorkVermontWashington

Wisconsin

ArkansasDelawareFloridaIowa

MinnesotaMontanaNew Hampshire

OhioOklahomaOregon

PennsylvaniaSouth DakotaTexas

Rhode Island Connecticut

RI:346

CALIFORNIA

NEVADA

80

OREGON

118

WASHINGTON

202.5

ARIZONA

200NEW MEXICO

91

TEXAS

141

OKLAHOMA

103

UTAH

69.5 COLORADO

84KANSAS

79

NEBRASKA

64

IDAHO

57

MONTANA

170NORTH DAKOTA

44

SOUTH DAKOTA

153

MINNESOTA

156

IOWA

136

MISSOURI

17

ARKANSAS

115

36LOUISIANA

MS

68

ALABAMA

42.5GEORGIA

37

FLORIDA

133.9

SOUTH CAROLINA

7

TENNESSEE62

KENTUCKY60

ILLINOIS

98

WISCONSIN

252MICHIGAN

200

IN

99.5

OHIO

125WV55

30VIRGINIA

PENNSYLVANIA

160

NEW YORK275

MAINE200

VTNH: 178

MA

CT:300NJ:270

DELAWARE:160

MARYLAND:200

DC:250

HAWAII

260

ALASKA

200

States that have recently passed or implemented a cigarette tax increase (since 1999)

WYOMING

60

State Cigarette Tax Rates(cents per pack)

State Average: $1.34 Per Pack

CT

MA:251

87

VT:224

States that have not passed tax increases since 1999

NH

45NORTH CAROLINA

State tax rates on tobacco products other

than cigarettes vary greatly between states.

December 2009

A Political Win

Note: If you have data from your own state poll, use those data; otherwise, you can use the following slides from

a January 2010 national poll.

Support For Increasing State Tobacco Taxes

National Survey of 847 Registered Voters

January 2010

Poll Highlights

• Increasing the tobacco tax is the most preferred way to address state budget shortfalls. – A strong majority of voters favor raising the tobacco tax as a way to

address the state budget deficit, while no other option tested received majority support.

– In fact, voters overwhelmingly oppose other tax increases or spending cuts that may be necessary to address the budget deficit.

• Two-thirds of American voters support increasing the state tobacco tax by $1.00 per pack. – This support remains strong across all demographic groups, including

party lines. A majority of Democrats, independents and Republicans favor increasing the tobacco tax.

• There is no difference in support between a $1.00 and a 50-cent

tobacco tax increase.

• A majority of voters across party lines would vote for a candidate who supports increasing the tobacco tax over a candidate who opposes increasing the tax.

Total numbers are roundedDarker shading indicates stronger intensity

Increasing The Tobacco Tax Is The Most PreferredWay To Address State Budget Deficits

As you may have heard, virtually all states are currently facing severe budget deficits. I am going to read you a list of proposals that have been suggested as a way to address the state budget deficit. After I read each one, please tell me if

you FAVOR or OPPOSE that proposal.

10 6-60-21

10 7-65-16

6 13-64-16

7 12-57-18

10 10-58-21

10 12-53-20

8 17-54-18

10 17-40-30

47 13-27-11

-100 -80 -60 -40 -20 0 20 40 60 80

Reduce funding for education

Increase the state gasoline tax

Increase the state tobacco tax

Oppose Favor

60%

17%

22%74%

International Communications Research SurveyJanuary 2010

Reduce funding for health care programs

Increase the state income tax 20%76%

19%80%

81%

38%

Increase the state sales tax 72% 25%

Reduce funding for Medicaid services

Reduce funding for road maintenance and construction

Reduce funding for state law enforcement

81%

70%

78%

16%

26%

20%

53

14

24

7

0

20

40

60

80

100

Favor Oppose

Total Favor: 67%

Total Oppose: 31%

Would you FAVOR or OPPOSE a one dollar per pack increase in the state tobacco tax, with part of the revenue dedicated to a program to reduce tobacco use, particularly among kids, and the rest dedicated to addressing the state budget deficit?

Voters Favor A One Dollar Increasein the State Tobacco Tax

Darker shading equals stronger intensityTotal numbers are rounded


67

31

70

28

64

35

68

32

0

20

40

60

80

100

All Voters Democrat Independent Republican

Favor OpposeTotal numbers are rounded

Support for a One Dollar Tobacco Tax IncreaseRemains Strong Across Party Lines



67

31

68

31

67

31

63

35

71

24

0

20

40

60

80

100

All Voters North East North Central South West


A One Dollar Tobacco Tax Increase Receives Majority Support Across the U.S.



0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Favor Oppose0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Favor Oppose

50%strong

24%strong

$1 Increase

Voters Support a Tobacco Tax IncreaseThere Is No Difference In Overall Support Between A $1 And A 50-Cent Increase

50-cent Increase


53%strong

24%strong


67%

31%

67%

31%

37

22

24

11

0

20

40

60

80

Candidate who supports tax Candidate who opposes tax


Candidate X supports a one dollar per pack tobacco tax increase with part of the revenue dedicated to a program to reduce tobacco use, particularly among kids, and the rest used to address the state budget deficit.

Candidate Y opposes the plan to increase the tobacco tax one dollar per pack because our state taxes are already too high.

59%

35%

Voters Prefer A Candidate Who SupportsIncreasing the Tobacco Tax


Voters of All Parties Prefer a Candidate Who Supports the Tobacco Tax

45 21-21-9

37 17-26-14

29 29-27-9

37 22-24-11

-60 -50 -40 -30 -20 -10 0 10 20 30 40 50 60 70

Democrat

Independent

Republican

All Voters 59%

66%

Candidate Who Opposes Tobacco Tax Candidate Who Supports Tobacco Tax

35%

40%

30%


58%36%

+24

+22

+36

54%

Candidate X, who supports the one dollar per pack tobacco tax increase

Candidate Y, who opposes one dollar per pack tobacco tax increase


+14

67

31

4453

74

24

0

20

40

60

80

100

All Voters Smokers Non-Smokers


Even 4 out of 10 Smokers Support aOne Dollar Tobacco Tax Increase



increasing the tobacco excise tax a public health win a budget win a political win a win, win, win...

Documents

year tobacco

tobacco related disease

tobaccorelated deaths

indiana tobacco prevention

tobacco excise taxes

price of tobacco products

tobacco related tobaccos

budget win