Tobacco Industry Rolls Out False… | Campaign for Tobacco-Free Kids
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Tobacco Industry Rolls Out False Claims Against Increasing Tobacco Tax to Protect Kids

Statement of Susan M. Liss, Executive Director, Campaign for Tobacco-Free Kids
April 16, 2013

WASHINGTON, DC – President Obama has proposed a 94-cent increase in the federal cigarette tax, and increased taxes on other tobacco products, to protect our children from tobacco addiction and save lives. Predictably, tobacco companies and their allies are attacking the proposal, claiming that tobacco taxes aren't a reliable revenue source and unfairly burden poor people.

Their claims are false. Experience shows that tobacco tax increases are a reliable and predictable source of revenue for governments. Also, because low-income communities have higher smoking rates, they gain the most from smoking declines caused by higher tobacco taxes, enjoying reductions in smoking-caused deaths, disease and costs.

Tobacco companies resort to these deceptive arguments to hide their real reason for opposing a tobacco tax increase: They know it is one of the most effective ways to reduce smoking, especially among kids. Study after study has proven this to be the case. Tobacco companies even admit it in their own internal documents. Here's what Philip Morris said in one document: '[It] is clear that price has a pronounced effect on 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.'

Members of Congress should side with America's kids, not the tobacco industry, and approve the proposed increase in tobacco taxes.

Here are some of the industry's attacks on the tobacco tax – and the actual facts:

Attack: Tobacco tax increases aren't a reliable source of future revenue.
The Facts: Even while reducing smoking, tobacco taxes have proven to be a reliable and predictable source of revenue for governments. Every time the federal government and the states have substantially increased cigarette tax rates, they have received more revenue than they would have otherwise. The 2009 federal cigarette tax increase generated substantial revenue, even while producing an historic drop in cigarette sales. Federal cigarette tax revenue increased by 129 percent, from $6.8 billion to $15.5 billion, in the 12 months after the tax (April 2009 to March 2010). Every state that has significantly increased its cigarette tax has also enjoyed a substantial increase in revenue.
Put simply, after a cigarette tax increase, the revenue gains on each cigarette pack sold far outweigh the revenue losses from declines in total cigarette sales. The revenues generated by cigarette tax increases will decline over time as smoking declines, but the revenue change will be gradual and predictable. In fact, tobacco tax revenues are more predictable and stable than other revenue sources such as income or corporate taxes, which can decline sharply during recessions. In addition, smoking declines caused by higher tobacco taxes can actually SAVE governments money by reducing tobacco-related health care costs, which total $96 billion a year in the United States.
A 2012 report by the bipartisan Congressional Budget Office (CBO) confirmed that a significant increase in the federal cigarette tax would raise substantial new revenue, even while reducing smoking. The CBO concluded that the cigarette tax increase 'would lead to a net reduction in the primary deficit in every year through 2085' (the entire period studied by the CBO).
(For more: Tobacco Tax Increase Are a Reliable Source of Substantial New State Revenue)
Attack: Cigarette tax increases are regressive and hurt poor people
The Facts: The tobacco companies have it backwards: it's the harms from smoking that are regressive. Lower-income communities suffer disproportionately from smoking-caused deaths, disease and costs. By prompting more lower-income smokers to quit or cut back, higher cigarette taxes will reduce those regressive harms and costs, directly helping lower-income smokers and also reducing smoking-caused costs and harms to their families. It is galling that tobacco companies claim to be concerned about lower-income people when they show no such concern for the deadly consequences of using their products. (For more: Cigarette Tax Increases Benefit Lower-Income Residents)
Attack: Tobacco tax increases will promote smuggling
The Facts: There is no evidence that a federal tobacco tax increase would prompt any increase in cigarette smuggling. Because a federal cigarette tax would raise cigarette prices by the same amount in each state, it would not increase the cigarette price differences between states that provide the primary incentive for interstate smuggling. The amount of cigarette smuggling across U.S. international borders is trivial and unlikely to increase given American smokers' strong preference for American-made cigarettes. Tobacco companies constantly exaggerate the extent of cigarette smuggling in their efforts to defeat higher tobacco taxes and other measures to reduce tobacco use. The answer to the cigarette smuggling problem is for low-tax states to increase their tobacco taxes and for states to improve law enforcement through tools such as high-tech tax stamps that track cigarettes from manufacture to sale. (For more: Increasing Federal Cigarette Taxes Will Not Create a Black Market in the United States)

The health and economic benefits of a federal tobacco tax increase were confirmed by the CBO's 2012 report. The CBO found that a 50-cent increase in the federal tobacco tax would raise substantial new revenue while prompting nearly 1.4 million adult smokers to quit by 2021, saving tens of thousands of lives and reducing health care costs, including for the Medicaid program. Based on the CBO's statement that a $1 tax increase would roughly double those benefits, the Campaign for Tobacco-Free Kids estimates that a 94-cent cigarette tax increase would prompt 2.6 million adult smokers to quit and save 18,000 lives by 2021.

In addition to these gains from helping current smokers quit, the Campaign for Tobacco-Free Kids estimates that a 94-cent increase in the federal cigarette tax would:

  • Prevent 1.7 million kids from becoming addicted adult smokers

  • Prevent 626,000 premature deaths from these reductions in youth smoking alone

  • Save $42 billion in future health care costs from these reductions in youth smoking.

The evidence is clear: The proposed increase in federal tobacco taxes would be both a health win and an economic win for our nation.