the tobacco tax a win, win, win for kentucky political win fiscal win health win

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The Tobacco Tax A WIN, WIN, WIN for KENTUCKY Political Win F iscal Win Health Win

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Page 1: The Tobacco Tax A WIN, WIN, WIN for KENTUCKY Political Win Fiscal Win Health Win

The Tobacco TaxA WIN, WIN, WIN for KENTUCKY

Political Win

Fiscal Win

Health Win

Page 2: The Tobacco Tax A WIN, WIN, WIN for KENTUCKY Political Win Fiscal Win Health Win

Tobacco’s Toll in Kentucky

• 7,700 tobacco-related deaths annually• 23,800 kids try first cigarette each year• 6,800 additional kids become regular daily

smokers every year• 107,000 kids alive today will die from

tobacco use• 24.5% of Kentucky high school students

are current smokers• 23.1% of high school males are current spit

tobacco users

Page 3: The Tobacco Tax A WIN, WIN, WIN for KENTUCKY Political Win Fiscal Win Health Win

Tobacco’s Economic Tollin Kentucky

• $1.5 billion in annual health care costs related to tobacco use

• $487 million in Medicaid costs alone

• Kentucky taxpayers pay $602 per household to treat tobacco-related disease

Page 4: The Tobacco Tax A WIN, WIN, WIN for KENTUCKY Political Win Fiscal Win Health Win

TOBACCO EXCISE TAXES

• A win for public health

• A win for state budgets

• A win among voters

Page 5: The Tobacco Tax A WIN, WIN, WIN for KENTUCKY Political Win Fiscal Win Health Win

“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 SciencesInstitute of Medicine1998

Page 6: The Tobacco Tax A WIN, WIN, WIN for KENTUCKY Political Win Fiscal Win Health Win

“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 JohnsonPhilip Morris Research Executive1981

Page 7: The Tobacco Tax A WIN, WIN, WIN for KENTUCKY Political Win Fiscal Win Health Win

Total Cigarette Prices and Cigarette Sales

18000

20000

22000

24000

26000

28000

30000

1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006

Year

Sal

es (

mill

ion

pac

ks)

$1.25

$1.75

$2.25

$2.75

$3.25

$3.75

$4.25

Pri

ce (

Jan

. 200

7 d

olla

rs)

Sales Price

Page 8: The Tobacco Tax A WIN, WIN, WIN for KENTUCKY Political Win Fiscal Win Health Win

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

Page 9: The Tobacco Tax A WIN, WIN, WIN for KENTUCKY Political Win Fiscal Win Health Win

TOBACCO TAXES ARE MOST EFFECTIVE WITH:

• Kids

• Lower Income Populations

• Ethnic Minorities

• Pregnant Women

Page 10: The Tobacco Tax A WIN, WIN, WIN for KENTUCKY Political Win Fiscal Win Health Win

Tobacco Taxes & State Revenues

• Despite inevitable declines in cigarette consumption …

• Increasing tobacco taxes ALWAYS increases state revenues

Page 11: The Tobacco Tax A WIN, WIN, WIN for KENTUCKY Political Win Fiscal Win Health Win

Tobacco Taxes, Packs Sold,and State Revenues

State Date Increase Amount

State Decline in Packs

Nat’l Decline in Packs

New Revenue

ME 2005 $1.00 -8.9% -2.6% $59.58 M

OK 2005 80 cents -10.5% -2.6% $87.9 M

MN 2005 75 cents -14.6% -2.6% $230.7 M

MI 2004 75 cents -15.2% -1.7% $238.9 M

RI 2004 75 cents -18.7% -1.7% $227.9 M

Page 12: The Tobacco Tax A WIN, WIN, WIN for KENTUCKY Political Win Fiscal Win Health Win

0

200

400

600

800

1,000

7/03 - 6/04 7/05 - 6/06

718.3 Million

606.2Million

The Kentucky Tax ExperienceFrom .03 to .30 on 6/1/05

$20.5Million

$158.8Million

$0

$50,000,000

$100,000,000

$150,000,000

$200,000,000

7/03 - 6/04 7/05 - 6/06

Revenue- 15.6%Packs Sold

+675%

Tax Burden 2006 Calculated from the last full FY before the tax increase to the first full FY after it

Page 13: The Tobacco Tax A WIN, WIN, WIN for KENTUCKY Political Win Fiscal Win Health Win

Cigarette Tax Revenues in Kentucky, 1990-2006

$0

$20

$40

$60

$80

$100

$120

$140

$160

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Cig

aret

te T

ax R

even

ue

Co

llec

ted

(in

mil

lio

ns)

Kentucky raised its cigarette tax by 27 cents to 30 cents per pack

on June 1, 2005

Page 14: The Tobacco Tax A WIN, WIN, WIN for KENTUCKY Political Win Fiscal Win Health Win

The Ohio Tax ExperienceFrom $0.55 to $1.25 on 7/1/05

0

200

400

600

800

1000

1200

Pac

ks S

old

7/04-6/05 7/05-6/06

-20.6%Packs Sold

$0

$250

$500

$750

$1,000

Tax

Rev

enue

s

7/04-6/05 7/05-6/06

Revenues Collected

+78.9%

Data from Tax Burden, 2006

1.01 billion

808.4 million

$554.6 million

$992.2 million

Page 15: The Tobacco Tax A WIN, WIN, WIN for KENTUCKY Political Win Fiscal Win Health Win

Benefits of a 75-Cent Tax Increase in Kentucky

• 46,800 fewer youth smokers

• Saving 14,900 kids a premature death from tobacco

• 29,500 fewer adult smokers

• Saving 7,800 adults from a smoking-caused death

Page 16: The Tobacco Tax A WIN, WIN, WIN for KENTUCKY Political Win Fiscal Win Health Win

Benefits of a 75-Cent Tax Increase in Kentucky

• $307.6 million in new tobacco tax revenues

• $17.6 million in 5-year savings from reducing smoking during pregnancy

• $19.7 million in 5-year savings from reduced heart attacks and strokes

• More than $1.0 billion in long-term healthcare savings from smokers averted

Page 17: The Tobacco Tax A WIN, WIN, WIN for KENTUCKY Political Win Fiscal Win Health Win

48

12

29

4

0

20

40

60

80

100

Favor Oppose

Total Favor: 60%

Total Oppose: 33%

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 Increasein the Cigarette Tax

Darker shading equals stronger intensityTotal numbers are rounded

KentuckyStatewide survey of registered voters – September 2007

Page 18: The Tobacco Tax A WIN, WIN, WIN for KENTUCKY Political Win Fiscal Win Health Win

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

Page 19: The Tobacco Tax A WIN, WIN, WIN for KENTUCKY Political Win Fiscal Win Health Win

Reliability of Cigarette Tax Revenue Following a Significant Increase

Trend in California Cigarette Tax Revenues Collected Since Tax Increase in January 1999

$841.9

$1,024.3$1,021.4$1,031.8$1,067.0$1,110.7$1,166.9

$612.1

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

FY 1998 FY 1999 FY 2000 FY 2001 FY 2002 FY 2003 FY 2004 FY 2005

Rev

enu

es (

Mill

ion

s)

Revenue data collected from CA Board of Equalization Annual Report, 2004-2005.http://www.boe.ca.gov/annual/statindex0405.htm#cigs

Cigarette tax increased by 50 cents to $0.87 per pack in the middle of FY 1999.

Page 20: The Tobacco Tax A WIN, WIN, WIN for KENTUCKY Political Win Fiscal Win Health Win

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.

Page 21: The Tobacco Tax A WIN, WIN, WIN for KENTUCKY Political Win Fiscal Win Health Win

Kentucky: Tobacco Money for Tobacco Prevention

0

50

100

150

200

250

300

350

Total State TobaccoRevenues

CDC Minimum PreventionSpending

Actual State TobaccoPrevention Spending

$25.1 Million $2.4 Million

$ 288.2 Million

$185.4 Million Tobacco Tax

Revenues

$102.8 MillionTobacco

Settlement Revenues

Page 22: The Tobacco Tax A WIN, WIN, WIN for KENTUCKY Political Win Fiscal Win Health Win

Tobacco Tax Messaging:How Do We Talk About It?

Page 23: The Tobacco Tax A WIN, WIN, WIN for KENTUCKY Political Win Fiscal Win Health Win

Lessons Learned From Other States

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)

The Core Message In Legislative Campaigns

Page 24: The Tobacco Tax A WIN, WIN, WIN for KENTUCKY Political Win Fiscal Win Health Win

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

Page 25: The Tobacco Tax A WIN, WIN, WIN for KENTUCKY Political Win Fiscal Win Health Win

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]

Page 26: The Tobacco Tax A WIN, WIN, WIN for KENTUCKY Political Win Fiscal Win Health Win

Conclusions

• WIN, WIN, WIN

• Kids, Kids, Kids

• Money, Money, Money

• Politically Safe

Page 27: The Tobacco Tax A WIN, WIN, WIN for KENTUCKY Political Win Fiscal Win Health Win
Page 28: The Tobacco Tax A WIN, WIN, WIN for KENTUCKY Political Win Fiscal Win Health Win