The Tobacco Tax A WIN, WIN, WIN for KENTUCKY

1
The Tobacco TaxA WIN, WIN, WIN for KENTUCKY
Political Win
Fiscal Win
Health Win
2
Tobaccos Toll in Kentucky

• 7,700 tobacco-related deaths annually
• 23,800 kids try first cigarette each year
• 6,800 additional kids become regular daily
  smokers every year
• 107,000 kids alive today will die from tobacco
  use
• 24.5 of Kentucky high school students are
  current smokers
• 23.1 of high school males are current spit
  tobacco users

3
Tobaccos Economic Tollin Kentucky

• 1.5 billion in annual health care costs related
  to tobacco use
• 487 million in Medicaid costs alone
• Kentucky taxpayers pay 602 per household to
  treat tobacco-related disease

4
TOBACCO EXCISE TAXES

• A win for public health
• A win for state budgets
• A win among voters

5
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 National Academy of Sciences Institut
e of Medicine 1998
6
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 Johnson Philip Morris Research
Executive 1981
7
(No Transcript)
8
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

9
TOBACCO TAXES ARE MOST EFFECTIVE WITH

• Kids
• Lower Income Populations
• Ethnic Minorities
• Pregnant Women

10
Tobacco Taxes State Revenues

• Despite inevitable declines in cigarette
  consumption
• Increasing tobacco taxes ALWAYS increases state
  revenues

11
Tobacco Taxes, Packs Sold,and State Revenues
12
The Kentucky Tax ExperienceFrom .03 to .30 on
6/1/05
Revenue
Packs Sold
- 15.6
675
Tax Burden 2006
Calculated from the last full FY before the tax
increase to the first full FY after it
13
Cigarette Tax Revenues in Kentucky, 1990-2006
Kentucky raised its cigarette tax by 27 cents to
30 cents per pack on June 1, 2005
14
The Ohio Tax ExperienceFrom 0.55 to 1.25 on
7/1/05
Packs Sold
Revenues Collected
-20.6
78.9
992.2 million
1.01 billion
808.4 million
554.6 million
Data from Tax Burden, 2006
15
Benefits of a 75-Cent Tax Increase in Kentucky

• 46,800 fewer youth smokers
• Saving 14,900 kids a premature death from tobacco
• 29,500 fewer adult smokers
• Saving 7,800 adults from a smoking-caused death

16
Benefits of a 75-Cent Tax Increase in Kentucky

• 307.6 million in new tobacco tax revenues
• 17.6 million in 5-year savings from reducing
  smoking during pregnancy
• 19.7 million in 5-year savings from reduced
  heart attacks and strokes
• More than 1.0 billion in long-term healthcare
  savings from smokers averted

17
Would you favor or oppose a 75 cent per pack
increase in the state cigarette tax, with part of
the revenue dedicated to a program to reduce
tobacco use, particularly among kids, and the
rest of the revenue dedicated to funding
education, Medicaid and other health care needs?
Kentucky Voters Favor A 75-cent Increase in the
Cigarette Tax
Total Favor 60
Total Oppose 33
Darker shading equals stronger intensity Total
numbers are rounded
Kentucky Statewide survey of registered voters
September 2007
18
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

19
Reliability of Cigarette Tax Revenue Following a
Significant Increase
Cigarette tax increased by 50 cents to 0.87 per
pack in the middle of FY 1999.
Revenue data collected from CA Board of
Equalization Annual Report, 2004-2005. http//www.
boe.ca.gov/annual/statindex0405.htmcigs
20
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.

21
Kentucky Tobacco Money for Tobacco Prevention
288.2 Million
102.8 Million Tobacco Settlement Revenues
185.4 Million Tobacco Tax Revenues
25.1 Million
2.4 Million
22
Tobacco Tax Messaging How Do We Talk About It?
23
Lessons Learned From Other States
The Core Message In Legislative Campaigns

• A WIN for public health and kids (prevents and
  reduces youth and adult smoking)
• A WIN for the state budget (reliable, predictable
  source of much-needed revenue)
• A WIN for politicians (or a win among voters)

24
Focus On Reducing Youth Smoking

• First and foremost, it is the reason why the
  public health community supports increasing
  tobacco taxes
• Voters find reducing youth smoking to be the most
  compelling reason to increase tobacco taxes
• Even voters who are reluctant to believe taxes
  will reduce smoking rates believe that increasing
  the tax is worth it if it saves just a few kids
  from becoming smokers
• Thus, political leaders realize the importance of
  framing the issue around reducing youth smoking

25
Focus On Reducing Youth Smoking
Governor Schweiker (R-PA) "As a Republican
leader who's worked hard to cut taxes, standing
in front of 12 million Pennsylvanians and
proposing a tax increase is new for me,"
Schweiker said. "But this increase will not only
keep cigarettes out of the hands of children and
save lives, it will go a long, long way toward
helping us deal with the most significant fiscal
dilemma this state has faced in years."
Associated Press June 6, 2002 Governor Pataki
(R-NY) This new cigarette tax increase will
"fight the scourge of teen tobacco use by
increasing the price on cigarettes, making them
less affordable for price-sensitive youngsters."
Press Release upon signing new tax increase into
law, January 25, 2002 Governor Graves (R-KS)
"This is more than a fiscal issue," said Graves,
. . . "This is driven in large part by health
benefits that we know will be derived from
reducing smoking, especially among young
Kansans." Associated Press, February 6, 2002
26
Conclusions

• WIN, WIN, WIN
• Kids, Kids, Kids
• Money, Money, Money
• Politically Safe

27
(No Transcript)
28
(No Transcript)