OKLAHOMA TOBACCO TAX INCREASE

1
OKLAHOMA TOBACCO TAX INCREASE

• EXCESSIVE TAXATION OR HEALTH SAVING MEASURE

2
TOBACCO USE IN OKLAHOMA

• 26.5 (57,100) of high school students smoke
• 25.2 (663,500) of adults in Oklahoma smoke
• 23.0 of male high school students use smokeless
• 9,100 kids (under 18) become new daily smokers
  each year
• 216,000 kids are exposed to secondhand smoke at
  home
• 14.3 million packs of cigarettes bought or smoked
  by kids each year

3
TOBACCOS DEATH TOLL

• 5,700 adults die each year from smoking
• 77,000 kids alive in Oklahoma today will die
  prematurely from smoking
• 540 to 970 adults, children, babies will die
  each year from secondhand smoke pregnancy
  smoking

4
TOBACCOS DEATH TOLL

• Smoking kills more people than alcohol, AIDS, car
  crashes, illegal drugs, murders, and suicides
  combined.
• Thousands more die from other tobacco-related
  causes such as fires caused by smoking (more than
  1,000 deaths/year nationwide).
• No good estimates are currently available for the
  number of Oklahomans who suffer from
  tobacco-related health problems each year without
  actually dying.

5
TOBACCOS MONETARY TOLL

• 908 million in annual health care costs in
  Oklahoma directly caused by smoking
• 170 million covered by the state Medicaid
  program
• 465 per household in residents' state federal
  tax from smoking-caused government expenditures
• 1.33 billion in smoking-caused productivity
  losses in Oklahoma

6
TOBACCOS MONETARY TOLL

• Any figures on the monetary toll of tobacco do
  not include health costs caused by exposure to
  secondhand smoke, smoking-caused fires, spit
  tobacco use, or cigar and pipe smoking.
• Non-health costs from tobacco use include
  residential and commercial property losses from
  smoking-caused fires (more than 500 million per
  year nationwide) extra cleaning and maintenance
  costs made necessary by tobacco smoke and litter
  (about 4 billion nationwide for commercial
  establishments alone).

7
OPPONENTS VIEWS

• Whats next, raising taxes on fatty foods?
  Raising cigarette tax is just the first step in
  public health organizations plan to tax
  everything that is bad for you.
• Cigarette tax increases will not save money
  because smokers dying early reduces state costs.
• Cigarette tax increases will reduce state
  revenues by eliminating or reducing state
  cigarette sales to smokers in other states.

8
OPPONENTS VIEWS

• Cigarette tax increases will hurt the states
  tobacco farmers.
• Cigarette tax increases will hurt the states
  economy by reducing cigarette sales and related
  employment, retailer revenues, etc.
• Cigarette tax increases do not reduce youth
  smoking (or any smoking).
• The state is already getting tons of tobacco
  money seeking more is excessive.

9
OPPONENTS VIEWS

• Cigarette tax increases are regressive and hurt
  poor people.
• Cigarette tax increases unfairly target smokers
  and make them shoulder the burden for statewide
  budget problems.

10
PROS

• In general, lower-income smokers are less likely
  to quit than higher-income smokers and they and
  their families are more likely to continue
  suffering from their smoking. But state
  cigarette-tax increases offer one of the best
  ways to fight that general trend.
• The increased tax per pack brings in far more new
  state revenue than is lost through the related
  reductions in the number of packs sold and taxed
  in the state.

11
PROS

• While state cigarette tax revenues after the
  proposed cigarette tax increase is fully
  implemented will likely slowly decline because of
  state smoking declines, those declines will be
  gradual and completely predictable. There will be
  no surprises and the state can easily adapt.
• Low-income households are already paying large
  amounts in state and federal taxes to cover
  smoking-caused government expenditures. Cigarette
  tax increases will reduce those smoking-caused
  expenditures and taxes.

12
PROS

• Smokers who quit or cutback will spend or use the
  money they formerly spent on cigarettes in other
  ways and those alternative uses are likely to
  produce more jobs and more productive economic
  activity.
• Smokers who quit will be more productive,
  healthy, and less of a burden on the average tax
  payer.

13
PROS

• Economic studies have found that even if smoking
  were entirely eliminated in the United States,
  the net economic effect on each state would be
  positive (except in a few of the major tobacco
  states), with more jobs created as well as other
  increases in productive economic activity.
• Even in these states the impact would be minimal
  and the increasing diversification of those
  states economies in recent years may have
  eliminated those net consequences altogether.
• Warner KE, et al., Employment implications of
  declining tobacco product sales for the regional
  economies of the United States, JAMA
  275(16)1241-6, April 24, 1996. Warner KE GA
  Fulton, The economic implications of tobacco
  product sales in a nontobacco state, JAMA
  271(10)771-6, March 9, 1994. Warner KE,
  Implications of a nicotine-free society,
  Journal of Substance Abuse 1(3)359-68, 1989.

14
PROS

• Substantial cigarette tax increases in states
  would actually increase total state employment
  and reduced cigarette sales have, historically,
  been linked with increased state retail
  employment.
• Gottlob, B., The Fiscal and Economic Impacts of
  Increasing the Cigarette Tax in New Hampshire,
  PolEcon Research, March 2003. Gottlob, B., The
  Fiscal and Economic Impacts of Increasing the
  Cigarette Tax in Texas, PolEcon Research, in
  press. Gottlob, B., The Fiscal and Economic
  Impacts of Increasing the Cigarette Tax in
  Virginia, PolEcon Research, April 15, 2004.

15
PROS

• Low-income households are already paying large
  amounts in state and federal taxes to cover
  smoking-caused government expenditures. Cigarette
  tax increases will reduce those smoking-caused
  expenditures and taxes.

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EFFECT OF TAX INCREASES

• A 10 increase in the price of cigarettes would
  decrease adult consumption by 3-5.
• A majority of studies concluded that youth are up
  to three times as responsive to price increases
  as adults.
• Effects of Price and Access Laws on Teenage
  Smoking Initiation A National Longitudinal
  Analysis (available from ImpacTeen)

17
EFFECT OF TAX INCREASES

• These estimates clearly indicate that increases
  in the real price of cigarettes (which can be
  achieved through excise taxation) will decrease
  the number of adolescents who start smoking.
• We can predict that every 10 increase in the
  price of cigarettes will reduce youth smoking by
  about 7.
• Effects of Price and Access Laws on Teenage
  Smoking Initiation A National Longitudinal
  Analysis (available from ImpacTeen)

18
INTERESTING FACT

• Adolescents with higher incomes from employment
  are significantly more likely to initiate
  cigarette smoking.
• African Americans, Mexicans, Asian Americans, and
  Other Latin races are significantly less likely
  to start smoking than Whites.
• Effects of Price and Access Laws on Teenage
  Smoking Initiation A National Longitudinal
  Analysis (available from ImpacTeen)

19
INTERESTING FACT

• Smoking by U.S. citizens accounts for less than
  half of the total demand for U.S. tobacco leaf,
  which is also smoked worldwide in cigarettes
  exported from the U.S. and manufactured overseas.
• The CDC estimates that Oklahoma has to pay 6.01
  in smoking related costs for every pack sold.
• Tobacco is the only product that if used as
  directed kills 33 of the people who use it.
• The FDA has no regulatory power over what tobacco
  companies put in tobacco products.

20
INTERESTING FACT

• The average smoker has significantly higher
  lifetime healthcare costs than the average
  nonsmoker, even though the average smoker dies a
  lot sooner than the average nonsmoker.
• See, e.g., Hodgson, T.A., Cigarette Smoking and
  Lifetime Medical Expenditures, Milibank Quarterly
  70(1) 81-115 (1992). Nusselder, W.J., et al.,
  "Smoking and the Compression of Morbidity,"
  Journal of Epidemiology and Community Health
  54(8) 566-74, August 2000. Warner, K.E., et al.,
  "Medical Costs of Smoking in the United States
  Estimates, Their Validity, and Their
  Implications," Tobacco Control 8(3) 290-300,
  Autumn 1999.

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THE COST OF TOBACCO

• The price tobacco companies charge per pack has
  increased drastically in recent years from 0.88
  in 1993 to 2.37 in 2004.
• During the same period the average tobacco tax
  has only increased from 0.24 to 0.39 for
  federal tax and from 0.29 to 0.735 for state
  taxes.
• Economic Resource Service, USDA,
  http//www.ers.usda.gov/Briefing/tobacco/Data/tabl
  e09.pdf. media stories on price and tax
  increases The Tax Burden on Tobacco, 2003.

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OKLAHOMA TAX

• Cigarette Tax from 0.23 to 1.03 per pack
• Little Cigars from 18 to 70 per cigar
• Smoking Tobacco from 40 to 80 of the factory
  list price
• Chewing Tobacco from 30 to 60 of the factory
  list price

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OKLAHOMA TAX

• The proposal also cuts capital gains taxes,
  reduces retirees' taxes, and permanently lower
  the maximum income tax rate from 7 percent to
  6.65 percent.
• The income tax cut results in a savings to
  taxpayers of 80 million a year.
• Increasing the tobacco tax will raise 400
  million for public health, including matching
  federal dollars.

24
OKLAHOMA TAX

• Oklahoma is currently 15th in the nation for
  tobacco taxes. This is only after the tax
  increase that was recently passed, previously it
  was ranked 42nd.
• In the year 2003, Oklahoma received 56.9 million
  in revenue from tobacco taxes.

25
OKLAHOMA TAX

• 53 of voters approved a legislative referendum
  to increase the cigarette tax.
• It also will increase taxes on other tobacco
  products.
• Revenue raised by the increases will finance
  various health-related programs, reduce certain
  taxes and provide money for state, county and
  local governments.
• The increases take effect on January 1, 2005.

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TOBACCO TAX USA
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CONCLUSION

• Tobacco use is a completely voluntary action
  except for the extremely addictive qualities of
  nicotine. Because of this a tobacco tax would
  relieve some of the tax burden on the rest of the
  productive general public. People who smoke are
  shown to be less productive and more unhealthy
  than non-smokers. Conclusive evidence shows that
  tobacco tax is very effective in reducing smoking
  among youth. With this evidence we should peruse
  a policy of prevention by increasing tobacco
  taxes which will in turn increase revenue for the
  state. This is a win-win for all parties
  involved. The health and productivity of
  Oklahomans will increase while allowing for the
  revenue from taxation to be directed to programs
  which help the general population of Oklahoma.
• Oklahomas tax increase was nothing more than
  an adjustment to put it in line with the rest of
  the nation. Before this increase the tobacco tax
  was only 0.23, which was well below that of the
  surrounding states. This measure will reduce
  youth smoking and allow for increased funding of
  those programs that desperately need it.