2009-01-13 20:32:53 - THE FOLLOWING IS BEING SENT TO ALL MEMBERS OF THE US CONGRESS: America's first antismoking organization very strongly supports the proposed expansion of the State Children's Health Insurance Program (SCHIP), and especially the proposed increase in the federal cigarette excise tax from 39¢ to $1 a pack, because there is overwhelming public support for boosting cigarette taxes even to much higher levels (e.g., $2.75/pack in New York State, plus an additional tax in New York City), and the U.S. tax to a level which is reasonable by historical benchmarks and generally accepted world norms, and because such an increase would very significantly reduce the rate of smoking and thereby both save millions of lives and help to slash smoking-related health care costs - the largest single preventable health care expense.

FIRST, the Current Tax is Very Low by U.S. Historical Benchmarks:

In 1960, even before there was any public consensus on the health dangers and increased medical care costs posed by smoking, the federal cigarette tax of 8¢/pack accounted for almost 33% of the average total retail price.

But, because the federal tax was not indexed for inflation - 8¢ would be 94¢ in today's dollars - and because Congress rarely raised it, it now accounts for less than 10% of the retail price.

Another way to compare today's tax with the tax in 1960 is to note how it has fallen so far behind inflation, even as most other taxes have kept pace.

If the federal cigarette excise tax had

kept pace with the Consumer Price Index for tobacco products, it would be $1.51 today - $1.12 higher than it actually is.

In short, Congress's failure to raise the tax to keep pace with inflation or the rapidly increased prices of tobacco products has made it easier for cigarette manufacturers to continue to raise prices, and to remain more profitable than other products which are forced to bear a reasonable tax burden.

SECOND: the Current Tax is Very Low By Generally Accepted World Norms:

The World Bank has documented that the U.S. cigarette tax rate is one of the lowest among high-income countries such as France, Greece, Italy, Portugal, and Spain, and even lower than among many developing countries such as Argentina, Brazil, and Chile.

Moreover, if the U.S. tax is compared to the retail price, the U.S. lags even further, and is also far behind Hungary, Jamaica, Pakistan, Poland, South Korea, Thailand, Turkey, and Vietnam. Perhaps the very best comparison is with the countries of the European Union.

There, cigarettes taxes range from more than $2/pack to almost $10/pack.

In an increasingly international marketplace, it is hard to justify a tax on U.S. cigarettes which is so much lower than that in virtually all other countries, either as a tax rate or as a percentage of the retail price.

Indeed, a U.S. tax on a product which is so much lower than generally accepted international norms would seem to be justified only if we really wanted to substantially increase consumption and production.

Since we want to discourage it - not only to save lives, but also to reduce health care costs - this very low tax rate is inexplicable as well as unjustified.

THIRD: There are Many Other Justifications and Arguments:

Each pack of cigarettes which is sold cost the U.S. economy over $10.25 - most of which is paid by nonsmokers in the form not only of higher taxes (to cover Medicaid, Medicare, Veterans' benefits, Indian benefits, MCH, and many other benefit programs), but also as inflated rates for medical insurance.

Smoking costs the Medicaid program over $30 billion a year, compared with less than $7.5 billion in annual cigarette tax revenue.

Raising the federal cigarette tax to only $1/pack would save 900,000 lives annually, bring in almost $10 billion in increased revenue, decrease smoking by kids by almost 10%, help persuade over 1 million current smokers to quit, and save about $1 billion in 5-year health-care savings alone. No other tax provides anything like these benefits.

Indeed, the prestigious and impartial National Academy of Sciences found that tax increases were far more effective than limitations on cigarette advertising and promotion, or antismoking campaigns, in reducing teen consumption of cigarettes.

Athough it has been argued that the tax is regressive, the Congressional Budget Office concluded that "excise taxes may not burden lower-income families as much as they appear to. . . . Measured as a percentage of total family expenditures, excise taxes are nearly the same for low-, middle-, and high-income families."

In any event, the primary beneficiaries of a tax increase on cigarettes are the poor people who will be most encouraged to quit smoking (and thereby live longer and healthier lives), as well as their spouses and children (who will now longer face the premature and painful death of a loved one), and who also will not be involuntarily subjected to carcinogenic secondhand tobacco smoke - estimated to cause over 50,000 additional totally unnecessary deaths each year.

For more information, please contact Professor John Banzhaf, Executive Director and Chief Counsel of Action on Smoking and Health (ASH) at (202) 659-4310.

PROFESSOR JOHN F. BANZHAF III
Executive Director and Chief Counsel
Action on Smoking and Health (ASH)
2013 H Street, NW
Washington, DC 20006, USA
(202) 659-4310 // ash.org