Tobacco Pricing

Reports

Tobacco tax may give boost to e-cigarettes (MN)
Next week, Minnesota’s state cigarette tax will increase by $1.60 per pack. Shop owners in Minneapolis and Saint Paul have reported an increase in demand for electronic cigarettes as a result of the upcoming tax increase. The tax increase is estimated to raise $440 million in each biennium.  To read more, click here.

Federal tobacco tax hike would reduce smoking, raise revenue and benefit lower-income Americans, new report finds
The Center on Budget and Policy Priorities (CBPP) issued a report supporting a proposal by President Obama to increase the federal cigarette tax by $0.94 per pack as an effective tool in reducing smoking and providing revenue to fund early childhood education initiatives. The report titled, “Higher Tobacco Taxes Can Improve Health and Raise Revenue,” also indicates that the tobacco tax would deliver benefits to a lower-income population. Findings from the CBPP show that the proposed plan would be a win-win tactic for reducing tobacco use and improving childhood education. The Center for Budget and Policy Priorities is a Washington, D.C. based organization working at the federal and state levels on fiscal policy and public programs that affect low- and moderate-income families and individuals. To read a statement about the report issued by the Campaign for Tobacco-Free Kids, click here. View the full report on the CBPP website here.

Cigarette makers confirm price increases
R.J. Reynolds Tobacco Co., Lorillard Inc., and Philip Morris USA announced an increase in prices for the majority of their cigarette brands starting this month. R.J. Reynolds and Lorillard will increase the list price by 6 cents a pack, or 60 cents a carton, and Philip Morris will decrease its national off-invoice promotional discount on Marlboro and L&M brands by 6 cents a pack. While these price increases will directly affect only wholesale and direct-buying customers, consumers will likely feel the effects of the price increases. The tobacco companies have not expressed concern that the price increase will deter smokers. To read more, click here.

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State Policy

Cheaper chew? Kentucky's tax on chewing tobacco set to drop (KY)
The state of Kentucky has announced a tax cut on chewing tobacco set to go into effect on August 1, 2013. The tax on chewing tobacco will be halved, from roughly 41 cents per pouch to 19 cents, and the state’s process for collecting the tax will change. The action, sponsored by Representative Rick Rand, D-Bedford, affects the state tax on chewing tobacco, but has no effect on snuff, cigars, pipe tobacco, cigarettes or other tobacco products. The tax cut is estimated to cost the state $425,784 in annual revenue, and a representative from tax-reform group Kentucky Center for Economic Policy expressed concern about the law being a step backwards from the governor’s tax-reform commission’s recommendation to raise the taxes on cigarettes and other tobacco products. To read more, click here, or click here to read the bill, HB 361.

Massachusetts tobacco tax increase will save lives, protect kids (MA)
The Massachusetts legislature has passed a $1.00 statewide cigarette tax increase as part of a larger bill that will upgrade the state’s transportation system through several tax increases. The statewide cigarette tax increase will bring the new total to $3.51 per cigarette pack. The bill, which is now in Governor Deval Patrick's hand for final signature, is expected to bring $118.5 million in new annual revenue and result in a 9% reduction in youth smoking in Massachusetts. Governor Patrick issued a statement saying he plans to amend the bill for a reason unrelated to the cigarette tax, and wants to work with the legislature to enact the bill. The tax increase will bring the Massachusetts cigarette tax to second highest in the U.S. According to the Campaign for Tobacco-Free Kids, Massachusetts's increase to $3.51 per pack will drive the nationwide average of state cigarette taxes to $1.53 per pack. Read more about the legislation here. Click here to view a press release by the Campaign for Tobacco-Free Kids, and click here to view a statement by the American Cancer Society Cancer Action Network.

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International

Understanding tobacco industry pricing strategy and whether it undermines tobacco tax policy: the example of the UK cigarette market (United Kingdom)
A new study in the journal Addiction examines the tobacco industry’s pricing strategy in the UK. Researchers conducted a comprehensive literature review of articles discussing brand segmentation and cigarette prices published from 1999-2009 to determine how tax increases and transnational tobacco companies’ (TTC) pricing strategies affect prices in the marketplace. The researchers found TTCs segment brands as premium, economy, mid, and ultra-low price. When taxes have risen, TTCs have shifted their pricing to keep prices on ultra-low price cigarettes from increasing, and the price gap between premium and ultra-low price brands has increased. These data may explain why socioeconomic inequities in smoking rates persist. Based on study findings, researchers suggest policy must focus on cigarette prices by price segment. Click here to read more.

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