TOBACCO TAX

Jill Collins, Julia Hecht,

Lorraine Lick, & Dawn Magee

PROBLEM IDENTIFICATION

Kansas budget shortfall estimation after one billion dollars in budget cuts: $500 million dollars (Shields, 2010, in press)

Recession recovery period Historically: state governments in the past have

raised cigarette and tobacco taxes to increase state revenue.

January: Cigarette and Tobacco Tax hike Proposed

BACKGROUND

Social Families working with fewer resources

Further stressing lower socio-economic population

Reduction in youth smoking

Decrease in Kansas residents who consume tobacco products (youth, elderly, low income residents)

BACKGROUND

Economic Tobacco related healthcare costs = $927 million

annually State Medicaid expenditures = almost $200 million

annually Benefits tobacco tax = potential decrease in

healthcare costs with accumulated long term savings

Increased financial burden on families = either decreased number of smokers or increased incidence of alternative ways of acquiring tobacco

BACKGROUND

Ethical

Improved health and decrease healthcare costs Targeting “mom-and-pop” owned stores Targeting lower income families

BACKGROUND

Legal & Political Factors March 2010 – Senate Tax Committee reviewed

legislation and addressed SB 516 which would increase tobacco tax 55 cents per pack

National average of tobacco products and retail sales tax is $1.34

Kansas Governor Mark Parkinson State of the State Address 2010 – supported enacting public smoking ban, raising cigarette & tobacco taxes to reduce teen smoking and in order to generate revenue

BACKGROUND

Legal & Political Factors Advocates

improves health & safety of population Tobacco industry accountability for illnesses and

deaths Prevents youth from smoking Generates revenue to help subsidize healthcare Helps develop education programs that can reduce

number of Kansas smokers

BACKGROUND

Legal & Political Factors Critics

Infringes on personal freedomDiscriminatory – unfairly targets smokers,

industries, and the poorPotential for increased crime – smuggling over

borders and access via internet/mail order

ISSUE STATEMENT

Should the state government increase tobacco taxes to resolve Kansas revenue deficits?

STAKEHOLDERS

Insurance Providers Healthcare Professionals Employee agencies providing health

insurance Governmental agencies Tobacco farmers Tobacco industries Consumers Small business owners

POLICY OBJECTIVES

3 benefits of raising tobacco taxes in KansasAdditional monies added to state coffers

Decreased number of smokers

Reduced healthcare costs of treating tobacco related illnesses

ALTERNATIVES Do Nothing/Status Quo Option

Continue with tax cuts and planned cigarette and tobacco tax hikes

Combined Change Option: Shift the burden of a tax increase from solely tobacco

products to include other products and current existing taxes that share burden of higher taxes with other all income bracket groups

Responsibility Option: 1998 Kansas awarded portion of Master Settlement

Agreement from 4 main tobacco companies – Currently state is pending less than 10% recommended by CDC on prevention programs.

EVALUATION CRITERIA

1. Cost

2. Benefits

3. Effectiveness

4. Political Feasibility

ANALYSIS OF POLICY ALTERNATIVES

Each policy alternative was evaluated utilizing the evaluation criteria outlined in the previous slide Cost Benefits Effectiveness Political Feasibility

Pros and Cons were identified and the following table was drawn up to compare the options in an easy to read format.

COMPARISON OF POLICY ALTERNATIVES

Alternative 1 Alternative 2 Alternative 3

Do Nothing/Status Quo Option

Combined Change Option

Responsibility Option

Criteria

Cost - + ++Benefits - + ++

Effectiveness - +/- ++Political

Feasibility- +/- +

Score for Alternative

-4 2 7

SUMMARY/RECOMMENDED POLICY

Doing Nothing/Status Quo clearly not an option continuation with this option will

result in higher deficits and further budget cuts in key community areas

Combined Option appears logical, however, there is questionable

effectiveness with potentially alternatives of acquiring products in a competitive market with easy access to several states

Responsibility Option most logical with highest comparison scores with

funds that are already in existence.

REFERENCES

Americans for Prosperity. (2010, April, 6). The economic impact of cigarette tax increases in Kansas. AFP Kansas Newsroom. Retrieved from http://www.americans forprosperity.org/ economic-impact-cigarette-tax-increases-kansas

Convenience Store News (2010, March, 17). Senate passes PACT Act. Retrieved March 29, 2010, from http://www.csnews.com/csn/cat_management/tobacco/ article_display. jsp?vnu_content_id=1004076900

Executive Summary (2009, December, 9). Campaign for tobacco free kids. Retrieved from http://www.tobaccofreekids.org/reports/settlements

Gever, M. (2007, August, 6) Tobacco tax increases: Pros and cons. Retrieved from http://www.ncsl.org/default.aspx?tabid=1477

Governor of the State of Kansas: Mark Parkinson (2010, January, 11). State of the State 2010. [Press Release]. Retrieved from http://governor.ks.gov/component/content/article/47/553-011110-state-of-the-state-address.

Kansas Department of Health and Environment. (2007). Tobacco use in Kansas: 2007 status report. Retrieved from http://www.kdheks.gov/tobacco/download/TobaccoReport.pdf

Kansas Department of Revenue. (2008). Annual report. Retrieved from http://www.ksrevenue. org/pdf/forms/08arcomplete.pdf

Kansas Department of Revenue. (2010). Kansas cigarette and tobacco products act: KSA chapter 79, article 33. Retrieved from

http://www.ksrevenue.org/abcCigStatutes.htm

Mason, D., Leavitt, J., & Chaffee, M. (2007). Policy and politics in nursing and healthcare. St. Louis: SaudersElsevier.