Tobaccos Toll in Kentucky

1
Tobaccos Toll in Kentucky

• 7,700 tobacco-related deaths annually
• 21,900 kids try first cigarette each year
• 6,500 additional kids become regular daily
  smokers every year
• 107,000 kids alive today will die from tobacco
  use
• 26 of Kentucky high school students are current
  smokers
• 26.7 of high school males are current spit
  tobacco users

2
We lead the nation!

• 28.2 adult smoking rate (county rates range from
  36 to 20)
• WV is 2 at 26.9
• Utah is lowest at 11.7
• 26 youth smoking rate only WV and AL are
  higher
• Healthy People 2010 goal 12 adults, 16 youth

3
KY Institute of Medicine- 2007
.the report found smoking to be Kentucky's
greatest challenge. Cancer, cardiovascular
disease, and respiratory illness are among the
more well-known consequences of tobacco use. More
than half of the individuals who smoke will die
of a smoking-related illness and more than 23 of
all deaths in Kentucky are attributable to
smoking, a modifiable health risk factor. Only
five of Kentucky's 120 counties have smoking
rates below the national average.
4
Consequences

• Leading cause of death in KY is cardiovascular
  disease
• Lead the nation in lung cancer
• High rates of low birth weight babies and infant
  mortality

5
A Major Reduction in Tobacco Use will save
precious resources for problems that are not
preventable or easily solved.
6
Tobaccos Economic Tollin Kentucky

• 1.5 billion in annual health care costs related
  to tobacco use (not including lost productivity -
  2.13 billion)
• 487 million in Medicaid costs alone
• Kentucky taxpayers pay 599 per household to
  treat tobacco-related disease

7
Smoking Costs to Businesses

• Increased health care expenditures
• Smoking employees have more medical costs, more
  workers compensation costs, higher insurance
  premiums
• Lost productivity smoking breaks, injuries or
  illness, mortality, nicotine-caused concentration
  problems
• Absenteeism missing work due to smoking-caused
  illness or injury
• Fire Losses Maintenance Costs cleaning costs,
  higher fire property insurance premiums

8
KY Institute of Medicine

• Tobacco use is the leading cause of preventable
  death, disease, and unnecessary healthcare costs
  across Kentucky. If we better educate the public
  about the addictive qualities and health risks
  associated with using tobacco products and find a
  way to help the 50 of Kentucky smokers who say
  they want to quit, we will be taking a
  significant step toward improving health and
  preventing premature death in our state.

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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
10
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
11
MANY OTHERS AGREE

• U.S. Surgeon General
• National Cancer Institute
• Centers for Disease Control Prevention
• Task Force on Community Preventive Services
• Presidents Cancer Panel
• World Bank
• Wall Street Tobacco Analysts

12
Since 2002

• 44 states and DC have increased their cigarette
  tax rates more than 80 times.
• New York - 1.25 increase (2.75!)
• Massachusetts, D.C., Maryland, Wisconsin 1.00
  increase all but WI (1.77) at or above 2 a
  pack

13
State Cigarette Tax Rates

• Average cigarette tax rate 1.19 per pack
• 13 states with tax rates at 2.00 per pack
• Another 13 states have tax rates of at least
  1.00 per pack

14
Cigarette Tax Rates(cents per pack)State Avg.
is 1.19 Per Pack
WASHINGTON 202.5
MONTANA 170
MAINE 200
NORTH DAKOTA 44
VT199
MINNESOTA 150.4
OREGON 118
VT
IDAHO 57
NH 133
NH
WISCONSIN 177
SOUTH DAKOTA 153
NEW YORK 275
MA
MA251
WYOMING 60
MICHIGAN 200
CT
RI246
CT200
IOWA 136
PENNSYLVANIA 135
NJ258
NEBRASKA 64
NEVADA 80
OHIO 125
DELAWARE115
UTAH 69.5
IN 99.5
ILLINOIS 98
WV 55
30 VIRGINIA
MARYLAND200
COLORADO 84
KANSAS 79
MISSOURI 17
DC200
87
KENTUCKY 30
CALIFORNIA
NORTH CAROLINA 35
TENNESSEE 62
OKLAHOMA 103
ARKANSAS 59
ARIZONA 200
NEW MEXICO 91
SOUTH CAROLINA 7
GEORGIA 37
ALABAMA 42.5
MS 18
TEXAS 141
36 LOUISIANA
ALASKA 200
HAWAII 200
FLORIDA 33.9
States that have not passed tax increases since
1999
States that have recently passed or implemented a
cigarette tax increase (since 1999)
October 2008
15
Benefits of a 70-Cent Tax Increase in Kentucky

• 55,400 youth kept from becoming addicted adult
  smokers
• Saving 19,000 kids a premature death from tobacco
• More than 34,900 fewer adult smokers
• More than 222 million in new tobacco tax revenues

16
A big increase is crucial..

• Use declines when PRICE increases
• Companies cut prices, use discounts and 2 for 1
  promotions to blunt the impact of a tax increase
• 13 billion spent on marketing much of that
  promotional vs. advertising
• P-M temporary prices cuts of 65-70 cents
  followed by an increase of 10 cents

17
TOBACCO EXCISE TAXES

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

18
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

19
TOBACCO TAXES ARE MOST EFFECTIVE WITH

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

20
Cigarette Pack Price Trend vs. Youth Smoking
Prevalence, 1991-2007
Sources Tax Burden on Tobacco, 2007 Youth
Behavioral Risk Surveillance System, 2007 U.S.
Bureau of Labor Statistics.
21
Stagnant Prices Stagnant Smoking Rates

• Youth
• Between 1997 and 2003, avg. U.S. price rose by
  90 and high school smoking declined by 40.
• Between 2003 and 2005, avg. price increased by
  5, and high school smoking increased slightly
• Adult
• Between 1997 and 2003, price rose by 90, and
  adult smoking declined by 12.5
• Between 2003 and 2006, price increased by 6, and
  adult smoking declined by less than 4

22
Tobacco Taxes State Revenues

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

23
Tobacco Taxes, Packs Sold,and State Revenues
24
The North Carolina ExperienceFrom 5 to 30 on
9/1/2005
Packs Sold
Revenues
401.9
- 18.7
Data from the North Carolina Department of Revenue
25
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
26
Cigarette Tax Revenues in Kentucky, 1990-2008
Kentucky raised its cigarette tax by 27 cents to
30 cents per pack on June 1, 2005
27
Reliability of Cigarette Tax Revenue Following a
Significant Increase
Rate increased by 25 to 76 per pack on October
1, 1996.
Rate increased by 25 to 51 per pack on January
1, 1993
Rate increased by 75 to 1.51 per pack on July
25, 2002.
Revenue data from Orzechowski Walker, The Tax
Burden on Tobacco, 2006.
28
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
29
Cigarette Tax Revenues in Mississippi,
1980-2007(in millions)
Mississippi raised its cigarette tax by 7 cents
to 18 cents per pack in 1985.
30
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 cross-border 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

31
Texas vs. LouisianaTexas increased its state
cigarette tax by 1.00 to 1.41 on 1/1/2007
Louisianas tax is 36 cents
Cigarette Tax Revenues (in millions)
Cigarette Pack Sales (in millions)
191.7
- 21
1.2
1.2
32
Tennessee vs. KentuckyTennessee increased its
state cigarette tax by 42 to 62 on 7/1/2007
Kentuckys tax is 30
Cigarette Tax Revenues (in millions)
Cigarette Pack Sales (in millions)
100.8
- 35
2.1
1.5
33
Indiana vs. KentuckyIndiana increased its state
cigarette tax by 44 to 99.5 on 7/1/2007
Kentuckys tax is 30
Cigarette Tax Revenues (in millions)
Cigarette Pack Sales (in millions)
43
- 20.3
2.1
1.5
34
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

35
Survey of 500 Registered Kentucky Voters
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Methodology

• Opinion Research Associates, Inc., interviewed by
  telephone 500 registered voters in Kentucky.
  Interviews were conducted between August 28 and
  September 9, 2007. The total sample of 500 cases
  has a margin of error of approximately 4.5
  percentage points at the 95 level of confidence.
  This means that 95 of all random samples of this
  size will produce results than can be expected to
  vary, as a result of random variation, by no more
  than 4.5 percentage points from the true
  population parameters. Findings are rounded to
  the nearest percentage point and may not add up
  100 owing to rounding error.

37
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
38
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?
A 75-cent Cigarette Tax Increase Receives
Majority Support Across The State
Total numbers are rounded
Kentucky Statewide survey of registered voters
September 2007
39
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?
Support for a 75-Cent Cigarette Tax
Increase Remains Strong Across Party Lines
Total numbers are rounded
Kentucky Statewide survey of registered voters
September 2007
40
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?
Majority Support for a 75-Cent Cigarette Tax
Increase Among All Income Groups
Total numbers are rounded
Kentucky Statewide survey of registered voters
September 2007
41
Voters of All Parties Prefer a Candidate Who
Supports the Cigarette Tax
Candidate X, who supports a 75-cent per pack
cigarette tax increase
Candidate Y, who opposes the plan to increase the
cigarette tax by 75-cents per pack
Candidate Who Opposes Cigarette Tax
Candidate Who Supports Cigarette Tax
20
48
28
15
46
31
18
52
34
24
50
26
Darker shading equals stronger intensity Total
numbers are rounded
Kentucky Statewide survey of registered voters
September 2007
42
Voters Are More Likely To Support A Cigarette Tax
Used To Fund Health Care and Tobacco Prevention
Now I am going to read some statements about how
the revenue from the tobacco tax might be used.
As I read each statement, just tell me whether
using the revenue that way would make you more
likely or less likely to favor the tax increase,
or if it would make no difference . . .
Less Likely to Favor
More Likely to Favor
Fund community health organizations and programs
that fight cancer, heart disease, and other
serious illnesses
74
7
Help prevent kids from starting to smoke and help
youth and adults to quit smoking
7
70
Revenue used to off-set the revenue lost from
cutting taxes on small business
32
25
If the revenue from the tobacco tax went into the
state's general fund
49
20
Kentucky Statewide survey of registered voters
September 2007
Total numbers are rounded Darker shading
indicates stronger intensity
43
Increasing The Cigarette Tax Is The Most
Preferred Way To Address The State Budget
Now as you may know, the state legislature is
currently considering certain proposals to make
sure important state priorities have adequate
funding. I am going to read you a list of
proposals that have been suggested to make sure
the state balances the budget while still funding
these priorities . . .
Oppose
Favor
62
33
Increase the state cigarette tax
Allow casino gaming at Kentuckys racetracks
43
47
Increase revenue through full casino gaming
40
50
Reduce funding for state colleges and universities
9
87
Decrease pension benefits for state employees
including teachers
7
89
Reduce funding for K-12 education
6
90
Kentucky Statewide survey of registered voters
September 2007
Total numbers are rounded Darker shading
indicates stronger intensity
44
Myths about tobacco taxes

• Wont reduce youth smoking
• Not a stable/reliable source of revenue
• Smuggling/Cross-border sales
• Will hurt the farmers
• Bad for the overall retail economy
• Unfair to target smokers
• Regressive tax hurts poor people
• Slippery slope Whats next???

45
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.

46
History of State Tobacco Prevention Funding in
Kentucky
5.8
5.8
5.5
Dollars in Millions
3.0
2.7
2.8
2.7
2.6
2.4
2.2
47
Kentucky Tobacco Money for Tobacco Prevention,
FY2009
294 Million
114 Million Estimated Tobacco Settlement Revenues
180 Million Estimated Tobacco Tax Revenues
3.7 Million
2.8 Million State Spending
57.2 Million
939,000 Federal Spending
48
Kentuckys Tobacco Control Spending vs. Tobacco
Industrys Marketing Spending
535.3 Million
3.7 Million
49
Kentuckys Tobacco Control Spending vs.
Tobacco-Related Healthcare Costs
1.50 Billion
3.7 Million
50
Impact of Full Funding in KY

• 19.5 percent decline in youth smoking
• 65,100 fewer kids become smokers
• 20,800 fewer kids dying prematurely from smoking
• 1.1 billion savings in lifetime health care
  costs
• Additional benefits in declines from adult
  smoking

51
If Program Were Eliminated

• 1 percent increase in youth smoking
• 3,400 more kids become smokers
• 1,090 more kids dying prematurely from smoking
• 59.6 million in additional lifetime health care
  costs
• Additional costs from adult smoking

52
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)

53
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

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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
55
Even our opponents get it . . . .

• "Another prime target for raising Illinois
  state revenues is the tobacco tax. New York
  dramatically increased cigarette taxes not long
  ago. Sales declined significantly, but state
  revenues rose over 400 million. And the people
  who stopped buying smokes were mostly teenagers.
  
• "It's a win-win-win situation for the state,"
  groaned one contract lobbyist with tobacco
  industry clients."
• Capitol Fax, February 15, 2002

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For more info

• Amy Barkley 502-777-8148
• abarkley_at_tobaccofreekids.org
• www.tobaccofreekids.org
• Research Facts Factsheets, State Taxes