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Wyoming Tobacco Tax and Revenue

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For further information email: WYSAC_at_uwyo.edu. Why Economists are Infamous? ... Also some of the economists believe: 'Tax his chew, tax his smoke, Teach him ... – PowerPoint PPT presentation

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Title: Wyoming Tobacco Tax and Revenue


1
Wyoming Tobacco Tax and Revenue
  • Prepared by the
  • Wyoming Survey Analysis Center
  • Tobacco Prevention Control Evaluation Group
  • For further information email WYSAC_at_uwyo.edu

2
Why Economists are Infamous?
  • They make too many assumptions
  • They never conclude
  • Also some of the economists believe
  • Tax his chew, tax his smoke,
  • Teach him taxes are no joke.
  • Tax his tobacco, tax his drink,
  • Tax him if he tries to think.
  • Tax his booze, tax his beers,
  • If he cries, tax his tears.

3
Why Increase Tobacco Taxes
  • Good for public health
  • Less tobacco use better health outcomes
  • Youth and the poor are more price-sensitive
  • Good for the economy
  • Will generate tax revenues
  • May increase employment, as spending is switched
    to other goods and services

4
Why is Raising Tobacco Taxes a Policy Challenge?
  • Tobacco taxes are NOT new taxes
  • The challenge and the trade-off
  • Higher taxes are good for public health
  • but
  • Policy makers worry about the economic
    consequences of higher taxes
  • Biggest Worry Reduce revenues ?
  • Fact is Higher excise taxes on Tobacco increases
    the tax revenue

5
Revenue Generating Potential of Tobacco Taxes
  • As price rises, consumption falls, but by less
    than the percentage rise in price (demand is
    price-inelastic).
  • As incomes rise, so does consumption - and total
    revenue (the income elasticity of demand is
    greater than one).
  • Production can be closely supervised by the
    government easy to collect taxes.

6
Facts about higher taxes on Tobacco Use?
  • Excise Taxes raise prices
  • A 10 price increase reduces consumption by
  • 4 in developed countries
  • 8 in developing countries
  • Poor and Youth are more price-sensitive
  • A 10 price increase reduces smoking as much as
    10 among youth and the poor.
  • High prices deter youth from starting to smoke
  • Source World Bank (2004)

7
Evidence from the UK
8
(No Transcript)
9
The Tobacco Master Settlement Agreement of 1998
Was Viewed As a Landmark Public Health Victory
November 23, 1998
  • Tobacco industry agrees to pay 246 billion over
    25 years
  • 46 states agree not to bring lawsuits against
    tobacco industry
  • Mississippi Texas, Florida, and Minnesota
    excluded due to prior agreements
  • Intent To cover past Medicaid costs related to
    tobacco injury
  • States goal 2025 of settlement for tobacco
    prevention
  • Some forms of tobacco marketing restricted

Source Campaign for Tobacco-Free Kids. Report on
fifth anniversary of 1998 tobacco settlement
finds most states fail to adequately fund tobacco
prevention programs. Press Release. October 27,
2004. Available at http//tobaccofreekids.org/Scr
ipt/DisplayPressRelease.php3?Display708.
10
Wyoming Tobacco Excise Tax Rates and Attitudes
  • Cigarette Excise Tax 60 cents per pack, 26th in
    the nation (a tax rate increase went into effect
    in July 2003. Prior to this the Wyoming tobacco
    excise tax rate was 12 cents per pack and 5th
    lowest in the nation) (National Center for
    Tobacco Free Kids).
  • Spit Tobacco Tax 20 of the wholesale price.
  • 62.0 of adults in Wyoming favor an increase in
    the state cigarette tax as a deterrent to smoking
    (ATS 2002, survey conducted pre-tax rate
    increase).
  • 34.0 of adults in Wyoming favor an increase of
    more than 1 a pack in the state cigarette tax
    (ATS 2002, survey conducted pre-tax rate
    increase).

11
Figure 1 State-Level Cigarette Excise Tax
Rates, 2004
Sources Campaign for Tobacco Free Kids (2004)
RTI data Farrely et al., 2003.
12
Consumption and Revenue Trend
  • In recent years, average state cigarette excise
    taxes have doubled from 31 cents (in 2002
    dollars) (Farrely et al., 2003) in 1990 to 79.2
    cents in 2004.
  • Analysis of an impact on tobacco sales due to an
    increase in excise tax (in various states and in
    Wyoming) reveals a typical pattern with a
    short-term and a long-term component
  • Sales usually increase just prior to a tax
    increase.
  • This increase is probably driven by consumers
    who are hoarding
  • cigarettes to delay the impact of the tax.
  • Sales decline sharply following an increase in
    cigarette excise taxes.
  • The steep decline in sales following the tax
    increase is probably driven by
  • consumers quitting or cutting back on smoking,
    and consumers who either use
  • cigarettes that they have bought prior to the tax
    increase or cigarettes that they
  • have bought from alternative low price sources.
  • Following the steep decline in sales immediately
    after an increase in the cigarette excise tax,
    sales rise again to settle at a new, generally
    lower, level than before the tax increase.

13
Consumption and Revenue Trend
  • Simple arithmetic post-tax average (12 months
    July03-April05) consumption was reduced by
    17.40 compared to the pre-tax average (52
    months Jan99-April03 excluding May and June
    2003).
  • Simple arithmetic post-tax average (12 months
    July03-April05) revenue increased by 212.55
    compared to the pre-tax average (52 months
    Jan99-April03 excluding May and June 2003).

14
Figure 2 Monthly Sales for Wyoming (in packs)
Source Wyoming Department of Revenue.
15
Figure 3 Monthly Cigarette Excise Tax Revenue
for Wyoming
Source Wyoming Department of Revenue.
16
Figure 4 Comparisons of Pre and Post Tobacco Tax
Average Monthly Sales
Source Wyoming Department of Revenue.
17
Figure 5 Comparisons of Pre and Post Tobacco Tax
Revenue
Source Wyoming Department of Revenue.
18
Table 1 Comparing Other Tobacco Tax Rates in WY
and the Neighboring States
Source Campaign for Tobacco-Free Kids. Report on
fifth anniversary of 1998 tobacco settlement
finds most states fail to adequately fund tobacco
prevention programs. Press Release. October 27,
2004. Available at http//tobaccofreekids.org/Scri
pt/DisplayPressRelease.php3?Display708.
19
Table 2 Comparing Spit Tobacco Use in Wyoming
and the Neighboring States
Source YRBS, 2003.
20
Why do we need to worry?
21
Some Facts
  • World Annual Tobacco deaths (in millions)
  • 2000 2030
  • Developed 2 3
  • Developing 2 7
  • World Total 4 10
  • 1 in 2 long-term smokers killed by their
    addiction
  • 1/2 of deaths in middle age (35-69)
  • Source World Bank (2002)

22
Tobacco deaths are on the increase Case of India
23
Table 3 Estimating Economic Cost
Source Source National Center for Tobacco-Free
Kids, June 14, 2004, www.tobaccofreekids.org /
Eric Lindblom.
24
The Benefits of Investing in Tobacco Prevention
  • Maine
  • High school smoking has declined 48
  • Middle school smoking has declined 59
  • Mississippi
  • High school smoking has declined 29
  • Middle school smoking has declined 48

Source Campaign for Tobacco-Free Kids. Report on
fifth anniversary of 1998 tobacco settlement
finds most states fail to adequately fund tobacco
prevention programs. Press Release. October 27,
2004. Available at http//tobaccofreekids.org/Scri
pt/DisplayPressRelease.php3?Display708.
25
Conclusion
  • Excise taxes levied on tobacco products typically
    reflect policymakers desire to balance improved
    health with increases in revenue.
  • Tax policy aimed at containing tobacco
    consumption (deterrence) and at increasing
    revenue can successfully achieve both objectives.

26
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