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The Tobacco Tax A WIN, WIN, WIN for KENTUCKY

The Tobacco Tax A WIN, WIN, WIN for KENTUCKY. Fiscal Win. Political 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

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The Tobacco Tax A WIN, WIN, WIN for KENTUCKY

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  1. The Tobacco TaxA WIN, WIN, WIN for KENTUCKY Fiscal Win Political Win Health Win

  2. 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

  3. 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

  4. TOBACCO EXCISE TAXES • A win for public health • A win for state budgets • A win among voters

  5. “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 Sciences Institute of Medicine 1998

  6. “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 Johnson Philip Morris Research Executive 1981

  7. 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

  8. TOBACCO TAXES ARE MOST EFFECTIVE WITH: • Kids • Lower Income Populations • Ethnic Minorities • Pregnant Women

  9. Tobacco Taxes & State Revenues • Despite inevitable declines in cigarette consumption … • Increasing tobacco taxes ALWAYS increases state revenues

  10. Tobacco Taxes, Packs Sold,and State Revenues

  11. The Kentucky Tax ExperienceFrom .03 to .30 on 6/1/05 Packs Sold Revenue - 15.6% +675% Tax Burden 2006 Calculated from the last full FY before the tax increase to the first full FY after it

  12. Cigarette Tax Revenues in Kentucky, 1990-2006 Kentucky raised its cigarette tax by 27 cents to 30 cents per pack on June 1, 2005

  13. The Ohio Tax ExperienceFrom $0.55 to $1.25 on 7/1/05 Packs Sold Revenues Collected -20.6% +78.9% $992.2 million 1.01 billion 808.4 million $554.6 million Data from Tax Burden, 2006

  14. 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

  15. 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

  16. Kentucky Voters Favor A 75-cent Increase in the Cigarette Tax 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? Total Favor: 60% Total Oppose: 33% Darker shading equals stronger intensity Total numbers are rounded Kentucky Statewide survey of registered voters – September 2007

  17. 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

  18. Reliability of Cigarette Tax Revenue Following a Significant Increase Cigarette tax increased by 50 cents to $0.87 per pack in the middle of FY 1999. Revenue data collected from CA Board of Equalization Annual Report, 2004-2005. http://www.boe.ca.gov/annual/statindex0405.htm#cigs

  19. 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.

  20. Kentucky: Tobacco Money for Tobacco Prevention $ 288.2 Million $102.8 Million Tobacco Settlement Revenues $185.4 Million Tobacco Tax Revenues $25.1 Million $2.4 Million

  21. Tobacco Tax Messaging: How Do We Talk About It?

  22. Lessons Learned From Other States The Core Message In Legislative Campaigns • 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)

  23. 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

  24. 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]

  25. Conclusions • WIN, WIN, WIN • Kids, Kids, Kids • Money, Money, Money • Politically Safe

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