New Report: Increasing Ohio's Tobacco Tax Would Fund Economic Stimulus Plan And Preserve Highly-Successful Tobacco Prevention Program

75-cent Per Pack Increase Would Help Raise $390 Million, Save 108,000 Lives

Apr. 23 2008

Washington, D.C. — Ohio leaders should fund a proposed economic stimulus plan by increasing state tobacco taxes instead of raiding tobacco prevention funds, recommends a report released today by the Campaign for Tobacco-Free Kids. In addition to raising revenue, this tobacco tax alternative would reduce smoking, save lives and save money by reducing health care costs, while the proposed raid of tobacco prevention funds would have the opposite effect — in fact, it would result in 23,200 more Ohioans dying prematurely from smoking and nearly $1 billion more in health care costs, according to the report.

A 75-cent per pack increase in the cigarette tax, combined with a parallel increase in the tax on other tobacco products, would raise $390.8 million in the first year alone. That's enough to replace both the $230 million that Governor Ted Strickland and legislative leaders have proposed taking from the Ohio Tobacco Prevention Foundation to help pay for the economic stimulus plan and to increase annual funding for the Foundation's tobacco prevention programs to the amount recommended by the Centers for Disease Control and Prevention ($145 million a year, compared to current funding of $44.7 million).

The report, titled "A Win-Win Solution for Ohio's Health and Economy: Raise the Tobacco Tax to Fund Job Creation and Preserve Tobacco Prevention Programs," finds that this tobacco tax plan would also:

  • Prevent nearly 240,000 Ohio kids alive today from becoming smokers
  • Prompt more than 120,000 current adult smokers to quit for good
  • Save more than 108,000 Ohioans from dying prematurely from smoking
  • Produce $4.6 billion in long-term health care savings, including $835 million in the state Medicaid program alone.

"This report shows that Ohio's leaders have presented a false choice between creating jobs and fighting the state's leading killer, tobacco use," said Matthew L. Myers, President of the Campaign for Tobacco-Free Kids. "By increasing tobacco taxes, Ohio can fund both the economic stimulus plan and tobacco prevention programs. This is truly a win-win solution for Ohio's economy and Ohio's health."

View the entire report (PDF, 302 KB). Support for this report was provided by the Robert Wood Johnson Foundation.

In contrast to the benefits from increasing Ohio's tobacco taxes, the report found significant harm from reducing the Ohio Tobacco Prevention Foundation's programs. Taking the $230 million from the Foundation would result in:

56,700 more Ohio kids alive today becoming smokers

19,400 adult smokers who continue to smoke, rather than quit

23,200 more Ohioans who will die prematurely from smoking

$992 million in additional, long-term health care costs, including $175 million under Medicaid.

The report's projections are based on scientific studies estimating the benefits of increasing tobacco taxes and funding tobacco prevention and cessation programs. Studies have found that every 10 percent increase in the price of cigarettes reduces youth smoking rates by 6.5 percent, adult smoking rates by 2 percent and total cigarette consumption by 4 percent. Governor Strickland himself has cited tobacco tax increases as an effective way to reduce smoking. Studies have also found a direct correlation between the amounts states spend on tobacco prevention and cessation programs and declines in youth and adult smoking.

The report was released as a Franklin County Court of Common Pleas judge is scheduled to hold a hearing Thursday on whether the Governor and Legislature have authority to take funds from the Ohio Tobacco Prevention Foundation.

On April 2, Governor Strickland and legislative leaders proposed taking $230 million of the Foundation's remaining endowment of $270 million to help fund an economic stimulus package. On April 8, in an effort to ensure its funds are used as intended for tobacco prevention programs, the Ohio Foundation entered into a contract to transfer $190 million of its funds to the American Legacy Foundation, a national organization that conducts tobacco prevention and cessation campaigns. The American Legacy Foundation has pledged to use these funds for the benefit of Ohio. This contract was executed shortly before Governor Strickland signed into law emergency legislation to liquidate the Ohio Foundation's endowment.

On April 9, the Ohio Tobacco Prevention Foundation filed a lawsuit challenging the constitutionality and legality of the emergency law. On April 10, Judge David W. Fais of the Franklin County Common Pleas Court ordered the Foundation's money frozen and scheduled the next hearing for April 24.

At the time of the 1998 state tobacco settlement, Ohio leaders promised to use a portion of the approximately $300 million in settlement funds the state receives each year for programs to prevent kids from smoking and help smokers quit. In 2000, they created the Ohio Tobacco Prevention Foundation to receive this portion of the annual settlement funds and establish a permanent endowment to run tobacco prevention and cessation programs. However, Ohio leaders since have diverted annual settlement payments from the Foundation, and last year they securitized (sold to investors) future settlement payments for a smaller lump-sum payment, effectively denying the Foundation any additional settlement funds. Now the Governor and legislative leaders want to raid what's left of the Foundation's previously allocated funds.

The Ohio Tobacco Prevention Foundation has a strong record of success. The Foundation's programs have helped reduce smoking by 47 percent among middle school students and by 38 percent among high school students since 2000. Adult smoking in the state has declined as well, with 22.4 percent of Ohio adults reporting that they smoked in 2007, down from 26.3 percent in 2000.

Ohio this year will collect $1.34 billion in tobacco-related revenue from the tobacco settlement and tobacco taxes, but has allocated none of it to tobacco prevention and cessation programs. Ohio's current cigarette tax is $1.25 per pack, ranking it 21st in the nation. Ten states have cigarette taxes of $2 or more per pack, including Michigan.

Tobacco use is the leading preventable cause of death in Ohio, and the United States as a whole. Each year in Ohio, tobacco use claims 18,600 lives and costs the state $4.37 billion in health care bills, including $1.4 billion in Medicaid payments alone. Government expenditures related to tobacco amount to a hidden tax of $638 a year on every Ohio household. Tobacco companies spend $724 million a year marketing their deadly products in Ohio, amounting to 16 times what the state now spends on tobacco prevention.

 

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