Wv smokeless tobacco tax 11 26-12 ann boonn

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  • 1. The Most Effective Way to Tax Smokeless Tobacco Products in West Virginia West Virginia Conference and Smokeless and Spit Tobacco November 29, 2012 Ann Boonn, Associate Director, Research aboonn@tobaccofreekids.org, (202) 296-5469 1Campaign for Tobacco-Free Kids www.tobaccofreekids.org
  • 2. What are we going to talk about? 1. The problem 2. How to best tax smokeless tobacco 3. Industry involvement 4. Resources If we have time: Responses to common industry arguments 2Campaign for Tobacco-Free Kids www.tobaccofreekids.org
  • 3. THE PROBLEM 3Campaign for Tobacco-Free Kids www.tobaccofreekids.org
  • 4. National Youth Smoking and Smokeless Tobacco Use 1997 - 2011 40% 37.7% All High School Students Smokeless Tobacco Use High School Males Smokeless Use All High School Students Cigarette Smoking 35% 36.4% High School Males Cigarette Smoking 30% High school boys’ smoking declined 8.7% 25% from 2003-2011. 21.8% 19.9% Overall high school 20% 21.9% smoking declined 17.4% from 2003-2011. 18.1% 15% 15.8% High school boys’ smokeless use increased 12.8% 10% 11.0% 16.4% from 2003-2011. 9.3% 7.7% Overall high school 5% 6.7% smokeless use increased 14.9% from 2003-2011. 0% 1997 1999 2001 2003 2005 2007 2009 2011 4Source: CDC, Youth Risk Behavior Surveillance Survey.Campaign for Tobacco-Free Kids www.tobaccofreekids.org
  • 5. Youth Smoking, Smokeless Tobacco Use in West Virginia 1997 - 2011 45% 42.4% All High School Students Smokeless Tobacco Use High School Males Smokeless Use 40% 41.9% All High School Students Cigarette Smoking High School Males Cigarette Smoking 35% High school boys’ smokeless use increased 30% 9.4% from 2003-2011. 31.0% 28.5% 25.5% High school boys’ 25% 25.6% smoking declined 14.8% 21.8% from 2003-2011. 20% 23.3% 19.1% Overall high school 15% smoking declined 33% 15.8% 14.4% from 2003-2011. 13.6% 10% Overall high school 5% smokeless use increased 5.9% from 2003-2011. 0% 1997 1999 2001 2003 2005 2007 2009 2011 5Source: CDC, Youth Risk Behavior Surveillance Survey.Campaign for Tobacco-Free Kids www.tobaccofreekids.org
  • 6. What’s behind these trends? • Products • Marketing • Price 6Campaign for Tobacco-Free Kids www.tobaccofreekids.org
  • 7. 7Campaign for Tobacco-Free Kids www.tobaccofreekids.org
  • 8. Most popular snuff brands among 12-17 year olds who have ever used snuff, 1999-201050% Skoal Copenhagen45% Grizzly Kodiak40% 2010 Top 3 Most Popular Moist Snuff35% Brands among 12-17 year olds30% 1. Grizzly (Reynolds American, via American Snuff Company)25% 2. Copenhagen (Altria, via UST) 3. Skoal (Altria, via UST)20% Source: 2010 NSDUH15%10% 5% 0% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: Analysis of NHSDA, NSDUH data 8Campaign for Tobacco-Free Kids www.tobaccofreekids.org
  • 9. Campaign for Tobacco-Free Kids www.tobaccofreekids.org
  • 10. Definitions Rates THE BEST WAY TO TAX SMOKELESS TOBACCO 10Campaign for Tobacco-Free Kids www.tobaccofreekids.org
  • 11. WV’s Current Tobacco Products Definition (6) "Other tobacco product" or "tobacco products other than cigarettes" means snuff and chewing tobacco and any other tobacco product that is intended by the seller to be consumed by means other than smoking and any cigar, pipe tobacco or other tobacco product other than cigarettes. WV Code §11-17-2 11Campaign for Tobacco-Free Kids www.tobaccofreekids.org
  • 12. WV’s Current Tax on Smokeless Tobacco • 7% of the wholesale price • Last increased on January 1, 2002 • Revenues to the general fund WV Code §11-17-3 12Campaign for Tobacco-Free Kids www.tobaccofreekids.org
  • 13. Percentage of Price vs. Weight-Based for Moist Snuff Tobacco Simple Simple Weight- Percentage-of-Price Percentage-of- Based with Minimum Tax Price Adequately and fairly taxes all moist snuff brands Depends   Adequate tax paid on a pack of low-weight moist snuff Depends   Revenue increases with consumption increases    Revenue increases with inflation    Revenue increases with industry’s price increases    13Campaign for Tobacco-Free Kids www.tobaccofreekids.org
  • 14. Adequately and fairly taxes all moist snuff brands? Simple Simple Weight- Percentage-of-Price Percentage-of- Based with Minimum Tax Price Adequately and fairly taxes all moist snuff brands Depends   From an Altria presentation in KS, 2009: 0.24/2.39 = 10% 0.24/0.86 = 28% 14Campaign for Tobacco-Free Kids www.tobaccofreekids.org
  • 15. Adequate tax paid on a pack of low-weight moist snuff? Simple Simple Weight- Percentage-of-Price Percentage-of- Based with Minimum Tax Price Adequate tax paid on a pack of low-weight moist snuff Depends   15Campaign for Tobacco-Free Kids www.tobaccofreekids.org
  • 16. Adequate tax paid on a pack of low-weight moist snuff? Large Camel Snus UST Skoal Pouches UST Skoal Snus 1 tin (15 pouches) = 0.53 oz. 1 tin (20 pouches) = 0.82 oz 1 tin (15 pouches) = weight unknown Regular-sized Camel Snus 1 tin (15 pouches) = 0.32 oz. Marlboro Snus 1 “foil pack” (6 pouches) = 0.1 oz. Traditional Moist Snuff Smokeless 1 tin (15 pouches) = weight unknown 1 tin = 1.2 to 1.5 oz. Stonewall Hard Snuff 1 box of 20 Pieces = 0.335 oz. Camel Dissolvables (test market) Marlboro & Skoal Sticks (test market) 1 package of 12 Pieces = 0.10-0.21 oz. 16 1 pack of 10 Sticks = weights unknownCampaign for Tobacco-Free Kids www.tobaccofreekids.org
  • 17. Adequate tax paid on a pack of low-weight moist snuff? Simple Simple Weight- Percentage-of-Price Percentage-of- Based with Minimum Tax Price Adequate tax paid on a pack of low-weight moist snuff Depends   10% wholesale $0.20/ounce Minimum tax equal to a $1.00 per-pack cigarette tax $0.24 $0.24 $1.00 Traditional Moist Snuff Smokeless 1 tin = 1.2 to 1.5 oz. $0.10 $0.024 $0.30 1/10th the weight = 1/10th the revenue Marlboro Snus 1 “foil pack” (6 pouches) = 0.1 oz. 17Campaign for Tobacco-Free Kids www.tobaccofreekids.org
  • 18. Under weight-based, revenues decline as low-weight smokeless products make up more of the market. Revenue Losses From Standard Weight-Based Tax on Moist Snuff (in constant dollars) $100 $90 $80 $70 $60 $50 Base Year Year 1 Year 2 Year 3 Year 4 Year 5 Projections assume stable consumption and sales over time, with inflation at 2% per year. 18Campaign for Tobacco-Free Kids www.tobaccofreekids.org
  • 19. Altria/UST’s Proposed Minimum Tax Their Language: “The tax imposed on a can or package of moist snuff that weighs less than 1.2 ounces shall be equal to the amount of tax imposed on a can or package of moist snuff that weighs 1.2 ounces.” The Problem: Extremely large packages Small tax per dose 19Campaign for Tobacco-Free Kids www.tobaccofreekids.org
  • 20. Single-Unit/Single-Dose Products = = = = = 20Campaign for Tobacco-Free Kids www.tobaccofreekids.org
  • 21. Revenue increases with consumption increases? Simple Simple Weight- Percentage-of-Price Percentage-of- Based with Minimum Tax Price Revenue increases with consumption increases    Weight-Based Tax Percentage-of-Price Tax Percentage-of-Price w/ Minimum $140.0 $130.0 $120.0 $110.0 $100.0 Base Year Year 1 Year 2 Year 3 Year 4 Year 5 [Based on actual 2000 to 2005 moist snuff sales price and volume data for from the U.S. Federal Trade Commission, and on recent industry data on the moist snuff market share and average prices of premium, value and discount brands.] 21Campaign for Tobacco-Free Kids www.tobaccofreekids.org
  • 22. Percentage of Price vs. Weight-Based for Moist Snuff Tobacco Simple Simple Weight- Percentage-of-Price Percentage-of- Based with Minimum Tax Price Revenue increases with inflation    Revenue increases with industry’s price increases    Weight-Based Tax Percentage-of-Price Tax Percentage-of-Price w/ Minimum $140.0 $130.0 $120.0 $110.0 $100.0 Base Year Year 1 Year 2 Year 3 Year 4 Year 5 [Based on actual 2000 to 2005 moist snuff sales price and volume data for from the U.S. Federal Trade Commission, and 22 on recent industry data on the moist snuff market share and average prices of premium, value and discount brands.]Campaign for Tobacco-Free Kids www.tobaccofreekids.org
  • 23. Weight-Based Taxes Harm Reduction INDUSTRY’S INVOLVEMENT 23Campaign for Tobacco-Free Kids www.tobaccofreekids.org
  • 24. Source: Common Cause 24Campaign for Tobacco-Free Kids www.tobaccofreekids.org
  • 25. Harm Reduction • What is it? • The problems with harm reduction • Harm reduction and taxes – Kentucky, Indiana, Kansas, Illinois 25Campaign for Tobacco-Free Kids www.tobaccofreekids.org
  • 26. 26Campaign for Tobacco-Free Kids www.tobaccofreekids.org
  • 27. 27Campaign for Tobacco-Free Kids www.tobaccofreekids.org
  • 28. WHAT YOU CAN DO 28Campaign for Tobacco-Free Kids www.tobaccofreekids.org
  • 29. Educate the Public 1. Lower prices = higher prevalence, especially among youth, no matter what type of tobacco product 2. Tax discrepancies encourage people to switch to lower-priced products 3. Problems with a simple weight-based tax system 29Campaign for Tobacco-Free Kids www.tobaccofreekids.org
  • 30. Kentucky voters overwhelmingly favor taxing other tobacco products at a rate comparable to cigarettes. “Currently, other tobacco products such as cigars and smokeless, or spit tobacco, are taxed at a lower rate than cigarettes. Regardless of whether or not there is an increase in the cigarette tax, do you favor oroppose taxing other tobacco products such as cigars and smokeless, or spit tobacco, at a rate comparable to cigarettes?” Overall By Smokers Total Favor: 82%* +41% +72% Total Oppose: 17% 85% 70% Strongly Favor 67% DK 29% 1% Strongly 13% Oppose 13% Smwht Smokers Non-Smokers Oppose (25%) (75%) Smwht 4% Favor Total Favor Total Oppose * Denotes Rounding 14% Kentucky Statewide Tax Survey, Conducted by Public Opinion Strategies, December 15th – 16th, 2008Campaign for Tobacco-Free Kids www.tobaccofreekids.org
  • 31. Montana Voters Support an Increase On Taxes on Cigars and Smokeless “Currently, other tobacco products such as cigars and smokeless, or spit tobacco, are taxed at a lower rate than cigarettes. Regardless of whether or not there is an increase in the cigarette tax, do you favor or oppose taxing other tobacco products such as cigars and smokeless, or spit tobacco, at a rate comparable to cigarettes?” (Q15)100% 78%80%60%40% 19%20% 3% 0% Favor Dont know Oppose Montana Statewide Tobacco Survey, January 18-19, 2011
  • 32. TFK Tax Resources • Factsheets, Reports – general and specific to state/locality • Polling • Model Legislation and Legislative Drafting Assistance • Media Resources – ads, sample LTEs, Ed Board memos • Grassroots Resources – microsites, educational flyers, action alerts, social networking tools 32Campaign for Tobacco-Free Kids www.tobaccofreekids.org
  • 33. Ann Boonn aboonn@tobaccofreekids.org (202) 296-5469 Factsheets: http://www.tobaccofreekids.org/facts_issues /fact_sheets/policies/tax/other_products/ 33Campaign for Tobacco-Free Kids www.tobaccofreekids.org
  • 34. RESPONSES TO COMMON INDUSTRY ARGUMENTS 34Campaign for Tobacco-Free Kids www.tobaccofreekids.org
  • 35. Industry Claim: Industry price reductions will reduce states’ revenues Response: • Industry increases its prices more often than it reduces prices. • Under a percentage-of-price rate, the revenues will still increase with inflation, whereas under a weight-based rate, revenues will decline. 35Campaign for Tobacco-Free Kids www.tobaccofreekids.org
  • 36. Industry Claim: Weight-based taxes create a stable and predictable funding stream of tax revenue for the state. Response: • Any tobacco tax creates steady and predictable revenue for states. • Revenues from weight-based taxes will decline over time despite price increases and as more people switch to the new generation of low-weight smokeless products. 36Campaign for Tobacco-Free Kids www.tobaccofreekids.org
  • 37. Industry Claim: Weight-based taxes are more fair than percentage-of-price taxes. Response: • Percentage-of-price taxes are flat across all products. • Under a weight-based system, cheaper products will be paying a higher percentage of their price in tax, while more expensive products pay a lower percentage of their price in tax. 37Campaign for Tobacco-Free Kids www.tobaccofreekids.org
  • 38. Adequately and fairly taxes all moist snuff brands? Simple Simple Weight- Percentage-of-Price Percentage-of- Based with Minimum Tax Price Adequately and fairly taxes all moist snuff brands Depends   From an Altria presentation in KS, 2009: 0.24/2.39 = 10% 0.24/0.86 = 28% 38Campaign for Tobacco-Free Kids www.tobaccofreekids.org
  • 39. Industry Claim: Smokeless tobacco should be taxed based on risk level. Response: • Smokeless tobacco is still harmful and making them cheaper makes them more accessible and affordable to youth. • If FDA finds certain smokeless products to be less harmful to the public at large, then that “modified risk” claim should be enough to encourage people to use smokeless tobacco, not the tax rates. 39Campaign for Tobacco-Free Kids www.tobaccofreekids.org
  • 40. Industry Claim: Weight-based taxes reduce the state’s administrative burden. Response: • The state is already collecting it this way and has been doing so for years, so any change would be an administrative burden at this point. 40Campaign for Tobacco-Free Kids www.tobaccofreekids.org