addressing tobacco pricing policies: a toolkit for tobacco control program managers
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Addressing Tobacco Pricing Policies: A Toolkit for Tobacco Control Program Managers. Overview. The Toll of Tobacco. Tobacco’s Toll in the United States. Leading preventable cause of death and disease Kills more than 400,000 people each year - PowerPoint PPT PresentationTRANSCRIPT
Tobacco’s Toll in the United StatesTobacco’s Toll in the United States Leading preventable cause of death and disease Leading preventable cause of death and disease Kills more than 400,000 people each yearKills more than 400,000 people each year More than $96 billion in annual health care costsMore than $96 billion in annual health care costs Tobacco-related illnesses and deaths:Tobacco-related illnesses and deaths:
Nearly 9/10 of Chronic Obstructive Pulmonary Disease Nearly 9/10 of Chronic Obstructive Pulmonary Disease (COPD/lung disease) Deaths(COPD/lung disease) Deaths11
1/3 of total cancer deaths1/3 of total cancer deaths 2 2
1/5 deaths from coronary1/5 deaths from coronary
heart diseaseheart disease33
Tobacco’s Toll in the United StatesTobacco’s Toll in the United States Every day, 3,500 kids try their first cigaretteEvery day, 3,500 kids try their first cigarette11
About 1,000 kids become daily smokers every day; About 1,000 kids become daily smokers every day; one-third of whom will die from smoking-related one-third of whom will die from smoking-related diseasesdiseases22
19.5% of high school students are current smokers19.5% of high school students are current smokers33
26% of high school students used some type of 26% of high school students used some type of tobacco product in the last monthtobacco product in the last month44
17.9% of adults currently smoke17.9% of adults currently smoke5
IN <STATE>IN <STATE> XX Adults who smokeXX Adults who smoke
XX High school students who smokeXX High school students who smoke
XX Kids (under 18 who try cigarettes for the first time each XX Kids (under 18 who try cigarettes for the first time each year)year)
XX Kids alive today XX Kids alive today
that will die from smokingthat will die from smoking
IN <STATE>IN <STATE>
$XX Medicaid costs $XX Medicaid costs alonealone
<STATE> taxpayers pay <STATE> taxpayers pay $XX per household to $XX per household to treat tobacco-related treat tobacco-related disease disease
$XX Annual health care costs related to $XX Annual health care costs related to tobacco usetobacco use
““The single most direct and reliable method for The single most direct and reliable method for reducing consumption is to increase the price of reducing consumption is to increase the price of tobacco products, thus encouraging cessation and tobacco products, thus encouraging cessation and reducing the level of initiation of tobacco use.”reducing the level of initiation of tobacco use.”
Taking Action to Reduce Tobacco UseTaking Action to Reduce Tobacco Use National Academy of SciencesNational Academy of Sciences
Institute of MedicineInstitute of Medicine19981998
Raising the Price of TobaccoRaising the Price of Tobacco
Unanimous AgreementUnanimous Agreement U.S. Surgeon GeneralU.S. Surgeon General National Cancer InstituteNational Cancer Institute11
U.S. Centers for Disease Control and PreventionU.S. Centers for Disease Control and Prevention Task Force on Community Preventive ServicesTask Force on Community Preventive Services President’s Cancer PanelPresident’s Cancer Panel11
Institute of Medicine of the National AcademiesInstitute of Medicine of the National Academies World BankWorld Bank World Health OrganizationWorld Health Organization Wall Street Tobacco AnalystsWall Street Tobacco Analysts
Cigarette Excise Tax: Policy TrifectaCigarette Excise Tax: Policy Trifecta
A win for public healthA win for public health
A win for state budgetsA win for state budgets
A win among votersA win among voters
Public Health WinPublic Health WinTotal 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
Sale
s (
millio
n p
acks)
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
Pri
ce (
Jan
. 2007 d
ollars
)
Sales Price
Source: Robert Wood Johnson ImpactTeen Tobacco Chart Book
Trends in Smoking by Young People and Price of Cigarettes Trends in Smoking by Young People and Price of Cigarettes (U.S. 1991- 2007)(U.S. 1991- 2007)
27.5%
30.5%
34.8% 36.4%34.8%
28.5%
21.9% 23.0%20.0%
$2.33
$2.64$2.39 $2.39
$2.71
$3.65
$4.19$3.97 $3.93
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
0%
5%
10%
15%
20%
25%
30%
35%
40%
1991 1993 1995 1997 1999 2001 2003 2005 2007
Youth Smoking Prevalence Cigarette Pack Price (in 2007 dollars)
Source: Robert Wood Johnson ImpactTeen Tobacco Chart Book
Public Health WinPublic Health Win
When prices go up, When prices go up, cigarette consumption goes down, cigarette consumption goes down, especially among:especially among:
KidsKids
Pregnant WomenPregnant Women
Lower Income Lower Income SmokersSmokers
A $1.00 per pack increase in price results A $1.00 per pack increase in price results in:in:
XX fewer kids XX fewer kids becoming smokersbecoming smokers
XX smokers quittingXX smokers quitting
XX lives savedXX lives saved
An Even Bigger Health Win if a Portion of the New Tax Revenue is
Committed to Tobacco Control Programs
Adult Smoking Prevalence in Washington StateAdult Smoking Prevalence in Washington State
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.
Source: BRFSS Data
Despite expected and hoped for Despite expected and hoped for declines in cigarette consumption…declines in cigarette consumption…
INCREASING TOBACCO TAXES ALWAYS INCREASING TOBACCO TAXES ALWAYS INCREASES STATE REVENUES INCREASES STATE REVENUES
Tobacco Taxes, Packs Sold, and Tobacco Taxes, Packs Sold, and State RevenuesState 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
Budget Win: Tobacco Taxes & RevenuesBudget Win: Tobacco Taxes & Revenues Stable: smoking declines are gradualStable: smoking declines are gradual
Predictable: much easier to estimate than Predictable: much easier to estimate than personal or corporate income tax revenuespersonal or corporate income tax revenues
Adjustable: any declines can be offset by Adjustable: any declines can be offset by additional tax increasesadditional tax increases
Produce health-care cost savings: decline in Produce health-care cost savings: decline in consumption offset by savings in health-care consumption offset by savings in health-care costscosts
Political WinPolitical Win Voters support tobacco tax increasesVoters support tobacco tax increases
Voter support is BIPARTISANVoter support is BIPARTISAN
Voters OPPOSE other tax increases and cuts to Voters OPPOSE other tax increases and cuts to important programsimportant programs
Voters support legislators who vote for tobacco tax Voters support legislators who vote for tobacco tax increasesincreases
Voters support larger tax increases just as much as Voters support larger tax increases just as much as smaller tax increasessmaller tax increases
Map of State Cigarette Tax RatesMap of State Cigarette Tax Rates
Note: states in bold have not raised cigarette excise taxes since 1999 or earlier
WV: 55¢
KY: 60¢VA: 30¢
OK: $1.03
TX $1.41
CO: 84¢
MT: $1.70 ND: 44¢
CA: 87¢
AK: $2.00
NM: $1.66AL: 42.5¢
LA: 36¢
NV: 80¢
IA: $1.36
MO: 17¢
MS: 68¢
Puerto Rico: $2.23
UT: $1.70
TN: 62¢
WA: $3.025
SD: $1.53
KS: 79¢
MA: $2.51 RI: $3.46 CT: $3.40
MD: $2.00DC: $2.50
NY: $4.35
VT: $2.62
OH: $1.25
IL: 98¢
SC: 57¢
NC: 45¢
NH: $1.78 ME: $2.00
WI: $2.52
FL:$1.339
NE: 64¢IN: 99.5¢
WY: 60¢
ID: 57¢
AR: $1.15
GA: 37¢
AZ: $2.00
PA: $1.60
OR: $1.18
HI: $3.20
NJ: $2.70DE: $1.60
MI: $2.00
MN: $1.586
Guam: $3.00No. MarianasIslands: $1.75
State Cigarette Excise Tax Rates - 2011State Cigarette Excise Tax Rates - 2011
Source: CDC, Office on Smoking and Health. State Tobacco Activities Tracking and Evaluation (STATE) System.
FACT: FACT: These taxes are more predictable These taxes are more predictable and stable than state income tax or and stable than state income tax or corporate tax revenues.corporate tax revenues.
MYTH: MYTH: Cigarette tax increases are not a Cigarette tax increases are not a reliable source of future state revenue.reliable source of future state revenue.
FACT: FACT: There are very good models and There are very good models and formulas available for accurate projections.formulas available for accurate projections.
MYTH: MYTH: States will States will not receive as not receive as much net new much net new income as they income as they expect.expect.
FACTS:FACTS:1.1. Cigarette excise tax increases Cigarette excise tax increases
create substantial increases in create substantial increases in revenue.revenue.
2.2. Tobacco industry claims of tax Tobacco industry claims of tax avoidance are exaggerated.avoidance are exaggerated.
3.3. Tax evasion can be prevented.Tax evasion can be prevented.
MYTH: MYTH: Smuggling and black markets Smuggling and black markets will be a huge problemwill be a huge problem..
MYTH: MYTH: Cigarette excise Cigarette excise taxes unfairly target taxes unfairly target smokers.smokers.
FACT:FACT: Smokers pay far Smokers pay far less than what the state less than what the state pays in smoking-related pays in smoking-related healthcare costs.healthcare costs.
MYTH:MYTH:The state The state already already receives receives enough enough
revenue fromrevenue fromtobacco.tobacco.
FACT: FACT: State tobacco State tobacco
settlement settlement payments and payments and tobacco excise tobacco excise taxes do not taxes do not
recover past and recover past and future costs.future costs.
MYTH: MYTH: Cigarette excise tax increases will Cigarette excise tax increases will hurt the state’s economy. hurt the state’s economy.
FACT: FACT: Spending will shift to other products Spending will shift to other products or to consumer savings.or to consumer savings.
MYTH: MYTH: Cigarette excise Cigarette excise tax increases hurt low tax increases hurt low income communities.income communities.
FACT: FACT: The consequences of smoking The consequences of smoking disproportionately hurt low income disproportionately hurt low income populations.populations.
FACT: FACT: Tobacco is a Tobacco is a separate case entirely, separate case entirely, with enormous costs with enormous costs unlike any other unlike any other product.product.
MYTH: MYTH: Raising tobacco excise taxes will lead Raising tobacco excise taxes will lead to taxing other unhealthy items.to taxing other unhealthy items.
They are largeThey are large They are implemented all at onceThey are implemented all at once They impose equivalent tax rates on all They impose equivalent tax rates on all
tobacco products tobacco products They complement local tax increases where They complement local tax increases where
permittedpermitted A PORTION OF REVENUE IS DEDICATED TO A PORTION OF REVENUE IS DEDICATED TO
TOBACCO CONTROLTOBACCO CONTROL
Tobacco Excise Tax Increases Tobacco Excise Tax Increases Largest Impact When:Largest Impact When:
TaTaxingxing Other Tobacco Products (OTP) Other Tobacco Products (OTP) Little cigarsLittle cigars CigarillosCigarillos Large cigar productsLarge cigar products Loose tobaccoLoose tobacco Smokeless tobacco Smokeless tobacco
productsproducts Low-weight smokeless Low-weight smokeless
tobaccotobacco
Tax Strategies on OTPTax Strategies on OTP Percent of wholesale price rather Percent of wholesale price rather
than weight basedthan weight based
Minimum tax ratesMinimum tax rates
Eliminate caps on rates or amounts Eliminate caps on rates or amounts
Minimum tax for percentage of Minimum tax for percentage of priceprice
Define cigarettes to include small Define cigarettes to include small cigars and cigarilloscigars and cigarillos
Non-Tax Price-Related PoliciesNon-Tax Price-Related Policies
Implementing or Implementing or increasing licensing feesincreasing licensing fees
Minimum price lawsMinimum price laws
Smuggling and other tax Smuggling and other tax evasion deterrents evasion deterrents
License FeesLicense Fees Raise cost of tobacco productsRaise cost of tobacco products
Provide better monitoring of salesProvide better monitoring of sales
Can be used to cover enforcement costsCan be used to cover enforcement costs
Minimum Price LawsMinimum Price Laws
Preserve the impact of Preserve the impact of high priceshigh prices
Counter manufacturer Counter manufacturer price incentivesprice incentives
Smuggling and Tax EvasionSmuggling and Tax Evasion Increase fines for smuggling and tax evasionIncrease fines for smuggling and tax evasion
Enforce fines and penalties for smuggling and Enforce fines and penalties for smuggling and other tax evasionother tax evasion
Ban or restrict internet salesBan or restrict internet sales
Implement high-tech tax stampImplement high-tech tax stamp
““It is clear that price has a pronounced effect on It is clear that price has a pronounced effect on the smoking prevalence of teenagers and that the smoking prevalence of teenagers and that the goals of reducing teenage smoking and the goals of reducing teenage smoking and balancing the budget would both be served by balancing the budget would both be served by increasing the Federal excise tax on cigarettes.”increasing the Federal excise tax on cigarettes.”
Myron JohnsonMyron JohnsonPhilip Morris Philip Morris
Research ExecutiveResearch Executive19811981
““The price of tobacco has an important influence on the demand for The price of tobacco has an important influence on the demand for tobacco products, particularly among young people. Substantial tobacco products, particularly among young people. Substantial
increases in the excise taxes would have a considerable impact on the increases in the excise taxes would have a considerable impact on the prevalence of smoking and, in the long term, reduce the adverse prevalence of smoking and, in the long term, reduce the adverse
health effects caused by tobacco.”health effects caused by tobacco.”
US Surgeon General’s Report , 2000US Surgeon General’s Report , 2000