Wv smokeless tobacco tax 11 26-12 ann boonn

Campaign for Tobacco-Free Kids www.tobaccofreekids.org

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 [email protected], (202) 296-5469

1


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

2


THE PROBLEM

3


National Youth Smoking and Smokeless Tobacco Use 1997 - 2011

9.3% 6.7% 7.7%

15.8%

11.0% 12.8%

36.4%

21.9%

18.1%

37.7%

21.8% 19.9%

0%

5%

10%

15%

20%

25%

30%

35%

40%

1997 1999 2001 2003 2005 2007 2009 2011

All High School Students Smokeless Tobacco UseHigh School Males Smokeless UseAll High School Students Cigarette SmokingHigh School Males Cigarette Smoking

Source: CDC, Youth Risk Behavior Surveillance Survey.

Overall high school smokeless use increased 14.9% from 2003-2011.

High school boys’ smokeless use increased 16.4% from 2003-2011.

Overall high school smoking declined 17.4%

from 2003-2011.

High school boys’ smoking declined 8.7%

from 2003-2011.

4


Youth Smoking, Smokeless Tobacco Use in West Virginia 1997 - 2011

15.8% 13.6% 14.4%

31.0%

23.3%

25.5%

41.9%

28.5%

19.1%

42.4%

25.6% 21.8%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

1997 1999 2001 2003 2005 2007 2009 2011

All High School Students Smokeless Tobacco UseHigh School Males Smokeless UseAll High School Students Cigarette SmokingHigh School Males Cigarette Smoking

Source: CDC, Youth Risk Behavior Surveillance Survey.

Overall high school smokeless use increased

5.9% from 2003-2011.

High school boys’ smokeless use increased

9.4% from 2003-2011.

Overall high school smoking declined 33%

from 2003-2011.

High school boys’ smoking declined 14.8%

from 2003-2011.

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What’s behind these trends?

• Products • Marketing • Price

6


7


Most popular snuff brands among 12-17 year olds who have ever used snuff, 1999-2010

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Skoal Copenhagen

Grizzly Kodiak

Source: Analysis of NHSDA, NSDUH data

2010 Top 3 Most Popular Moist Snuff Brands among 12-17 year olds

1. Grizzly (Reynolds American, via American Snuff Company)

2. Copenhagen (Altria, via UST)

3. Skoal (Altria, via UST)

Source: 2010 NSDUH

8



THE BEST WAY TO TAX SMOKELESS TOBACCO

Definitions Rates

10


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

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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

12


Percentage of Price vs. Weight-Based for Moist Snuff Tobacco

Simple Percentage-of-

Price

Simple Weight-Based

Percentage-of-Price with Minimum Tax

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

13


Adequately and fairly taxes all moist snuff brands?

14

From an Altria presentation in KS, 2009:

0.24/2.39 = 10% 0.24/0.86 = 28%


Price

Simple Weight-Based


Adequately and fairly taxes all moist snuff brands Depends


Adequate tax paid on a pack of low-weight moist snuff?

15


Price

Simple Weight-Based


Adequate tax paid on a pack of low-weight moist snuff Depends



Marlboro Snus 1 “foil pack” (6 pouches) = 0.1 oz.

1 tin (15 pouches) = weight unknown

Regular-sized Camel Snus 1 tin (15 pouches) = 0.32 oz.

UST Skoal Pouches 1 tin (20 pouches) = 0.82 oz

Stonewall Hard Snuff 1 box of 20 Pieces = 0.335 oz.

Camel Dissolvables (test market) 1 package of 12 Pieces = 0.10-0.21 oz.

Large Camel Snus 1 tin (15 pouches) = 0.53 oz.

Traditional Moist Snuff Smokeless 1 tin = 1.2 to 1.5 oz.

Marlboro & Skoal Sticks (test market) 1 pack of 10 Sticks = weights unknown

UST Skoal Snus 1 tin (15 pouches) = weight unknown

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17


Price

Simple Weight-Based


Adequate tax paid on a pack of low-weight moist snuff Depends

Traditional Moist Snuff Smokeless 1 tin = 1.2 to 1.5 oz.

Marlboro Snus 1 “foil pack” (6 pouches) = 0.1 oz.

10% wholesale $0.20/ounce Minimum tax equal to a $1.00 per-pack cigarette tax

$0.24 $0.24 $1.00

$0.10 $0.024 $0.30

1/10th the weight = 1/10th the revenue


Under weight-based, revenues decline as low-weight smokeless products make up more of the market.

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$50

$60

$70

$80

$90

$100

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.

Revenue Losses From Standard Weight-Based Tax on Moist Snuff (in constant dollars)


Altria/UST’s Proposed Minimum Tax

The Problem: Extremely large packages Small tax per dose

19

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.”


Single-Unit/Single-Dose Products

20

= = = = =


Revenue increases with consumption increases?

21


Price

Simple Weight-Based


Revenue increases with consumption increases

$100.0

$110.0

$120.0

$130.0

$140.0


Weight-Based Tax Percentage-of-Price Tax Percentage-of-Price w/ Minimum

[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.]


Percentage of Price vs. Weight-Based for Moist Snuff Tobacco


Price

Simple Weight-Based


Revenue increases with inflation Revenue increases with industry’s price increases

22

$100.0

$110.0

$120.0

$130.0

$140.0


Weight-Based Tax Percentage-of-Price Tax Percentage-of-Price w/ Minimum

[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.]


INDUSTRY’S INVOLVEMENT

Weight-Based Taxes Harm Reduction

23


24 Source: Common Cause


Harm Reduction

• What is it? • The problems with harm reduction • Harm reduction and taxes

– Kentucky, Indiana, Kansas, Illinois

25


26


27


WHAT YOU CAN DO

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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

29


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 or oppose taxing other tobacco products such as cigars and smokeless, or spit tobacco, at a rate comparable to

cigarettes?”

Strongly Favor 67%

Smwht Favor 14%

Smwht Oppose

4%

Strongly Oppose

13%

DK 1%

70%

85%

29%

13%

Smokers (25%)

Non-Smokers (75%)

Total Favor Total Oppose

By Smokers Overall Total Favor: 82%* Total Oppose: 17%

+41% +72%

* Denotes Rounding

Kentucky Statewide Tax Survey, Conducted by Public Opinion Strategies, December 15th – 16th, 2008

Montana Voters Support an Increase On Taxes on Cigars and Smokeless

78%

3%

19%

0%

20%

40%

60%

80%

100%

Favor Don't know Oppose

“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)

Montana Statewide Tobacco Survey, January 18-19, 2011


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

32


Ann Boonn [email protected]

(202) 296-5469

Factsheets: http://www.tobaccofreekids.org/facts_issues

/fact_sheets/policies/tax/other_products/

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http://www.tobaccofreekids.org/facts_issues/fact_sheets/policies/tax/other_products/

http://www.tobaccofreekids.org/facts_issues/fact_sheets/policies/tax/other_products/


RESPONSES TO COMMON INDUSTRY ARGUMENTS

34


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.

35


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.

36


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.

37


Adequately and fairly taxes all moist snuff brands?

38

From an Altria presentation in KS, 2009:

0.24/2.39 = 10% 0.24/0.86 = 28%


Price

Simple Weight-Based


Adequately and fairly taxes all moist snuff brands Depends


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.

39


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.

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Wv smokeless tobacco tax 11 26-12 ann boonn