Phasing in a tobacco tax – 2/2/11

Q: West Virginia is seeing a possible tobacco tax increase taking traction during the current Session. The tobacco lobbyists are proposing to some key legislators that any increase be spread out over the course of a few years.* Is any other state seeing similar industry tactics?

* Obviously, this tactic is to enable the industry to provide discounts, price cuts, and other incentives to stave off any negative outcome of tobacco product sales. And, of course, from a health standpoint, the incremental tax /cost increases would have a very disadvantageous effect on the health outcomes!

A:

1. Arkansas: Actually – I think it is a great idea – IF the tax increases are substantial increases each time. I’m sure that is not what the tobacco industry is proposing!
    
   We have tracked our monthly tobacco tax revenue from our 56 cent cigarette tax increase (and also increase on other tobacco products) on March 1, 2009. Very quickly, the new baseline of sales/stamps sold/revenue obtained was established. Therefore, we need another tax increase, as we’re at a new baseline. So, if we could have even a lowly 50 cent increase every year, it is better than our 56 cent increase every 6 years.
    
   Would love to hear what people think about a real tax increase every 1 or 2 or 3 years – built into the law!!!
   
   Editor’s note: A fact sheet from the Campaign for Tobacco-Free Kids mentions that a periodic, automatic tax increase could be implemented in order to stabilize tobacco tax revenues over time and account for inflation (see part III C).
    
2. Oklahoma: Oklahoma has had some experience with this. Delay is a standard tactic used by the tobacco industry. Delaying cost increases slows tobacco cessation and minimizes reduced consumption – all to keep more money in their pockets. Their documents actually state this. See attached:
    
   • Ballot Issues Decision Making, Tobacco Institute
   • How Tobacco Companies Fight Tobacco Control, Campaign for Tobacco-Free Kids
      
   They may realize that they are losing the battle with tax increases state-by-state, so rather than fight a bill altogether, they “compromise” to do a “phase in.” Sometimes, that also results in the bill getting killed altogether, or introducing legislation in subsequent years to reverse the phased in approach, depending on the political atmosphere. It also gives them time to put money into political campaigns to get tobacco industry supporters into the legislature. Delaying the tax allows them more time to get our kids hooked for a lifetime (“replacement smokers” – a tobacco industry term) and keep their profits up.
    
   It is best not to compromise – stick to your guns – get your supporters on board and educate them to this tactic – ask the legislators targeted by the industry for support - why they think the tobacco industry would do this – what is their rationale? Is there any positive reason the tobacco industry would want this? Keep your arguments focused on health issues, cost of health care from tobacco related disease that all tax payers incur, and improving the health of our kids and reducing their tobacco use. Price fluctuations impact minors even more than adults. See attached: Fact Sheet: Raising Cigarette Taxes Reduces Smoking, Especially Among Kids (And The Cigarette Companies Know It), Campaign for Tobacco-Free Kids.  These arguments are hard to counter.
    
   Make it a public issue to get grassroots supporters to call their legislators and argue against this. All it takes are five calls to each legislator and they will listen to you. Be VERY wary of this tactic!!
    
3. Washington: When Washington State passed a dollar per pack increase in its tax last year, there was no significant industry opposition.  No effort to spread the increase over multiple years either.

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