Is This Cig. Tax Reasonable?
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| Wed, 04-01-2009 - 12:59pm |
The new cigarette taxes take effect today.
I don't roll cigarettes, but I found this to be quite harsh. The average cost of a pound went from $15.99 to $60.
http://www.chron.com/disp/story.mpl/front/6352568.html
Are they just haphazardly throwing taxes out here and there, and hoping for the best? If the real reason is for people to quit smoking.. and they do, what are they going to go after next to make up that revenue? Should one section of the US be more responsible for child health care than the rest?
I'm disappointed in this new tax. I don't think it's out of the realm of possibilities that this could cause many stores to fail, and leave people without jobs.
I think smokers are such an easy target that no one's thinking ahead on this issue.

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That's great!
:o)
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Oh....What is that?
Anyway....Here's some info on Canada's approach to smoking for anyone who's interested. Halfway down, I've capitalized the title ~~PRICE MATTERS~~ for anyone interested in looking at this purely from a cost/higher tax perspective....they can just jump down the page.
http://www.hc-sc.gc.ca/hl-vs/tobac-tabac/commun/consultation/_ftcs-tfsc/3-eng.php
The Federal Tobacco Control Strategy (FTCS) at the Mid-way Mark
Summer 2006
What We've Learned
"Although substantial, the burden of tobacco-related disease in Canada has eased somewhat and constitutes at least one bright spot in developments over the past 10 years. The reduction in smoking-related death and illness may be the result of improved tobacco control measures since 1992."
~~The Costs of Substance Abuse in Canada 2002~~
Tobacco Control Works ...
Canada now has the lowest smoking rates in the country's history. For the first time since the Strategy's inception in 2001, those who have quit smoking outnumber current smokers. In 2004, 6.7 million Canadians or 26% of the population were former smokers, compared to less than 5 million current smokers (19%).
Canada was one of the first countries to stop the increase in smoking among youth aged 15-19 during the late 1990's. In 2005, 18% of youth smoked, with the lowest annual smoking rate for teenage girls since monitoring of smoking began in 1965. By comparison, in the early 1980s, more than 40% of youth 15-19 years of age were smokers. The prevalence of smoking among young adults aged 20 to 24 was also down in 2005 to 26%. While still high, it is the lowest rate since Health Canada first reported prevalence.
. . . But It Requires Comprehensive, Integrated and Sustained Action
Tobacco control is a long-term proposition. It has taken roughly 40 years of tobacco control activity by all levels of government and the many non-governmental organizations to achieve the significant gains that Canada is enjoying today. As the Costs of Substance Abuse in Canada 2002 underscores, the greatest gains have been made over the past decade after the implementation of a truly comprehensive, integrated and sustained approach. The power of partnerships and increased resources for tobacco control efforts have all contributed to the results being observed.
Canada learned about the detrimental impacts of cutting back on tobacco control activities in the early 1990s, when tobacco taxes were temporarily reduced to address cigarette smuggling along the Canada-US border. While the cuts helped to alleviate illegal sales, lower cigarette prices produced their own set of problems such as increased youth smoking rates and increased consumption, both attributable to lower priced cigarettes.
Mass media and social marketing are key parts of the integrated effort to change Canadians' lifestyle choices and behaviours, enhancing other measures such as public education, taxation and regulation. National campaigns also support provincial/territorial promotional and legislative efforts.
Partnerships Are Essential
No single initiative, government department or even an individual government can effect meaningful change on its own. Governments at different levels possess differing and varying means of influencing people's smoking behaviour. They range from building community capacity to supporting local health programs and coalitions, social marketing, requiring package labelling that outlines risks associated with a product, regulating the availability and marketing of potentially harmful products, and taxation. Governments set policies and develop programs in these areas, and provide financial support to community groups engaged in public awareness and education campaigns. By integrating all of these efforts, the numerous initiatives of various governments, health workers and communities can be mutually reinforcing.
Partnerships with community-based organizations are equally instrumental in producing positive results, as public health groups and non-governmental organizations are often closer to both the problems and the solutions.
Given Canada's track record in tobacco control, these partnerships have now extended into the international arena, where Canadian expertise and experience is sought on tobacco control. As evidence of this leadership, Canada's legislative and regulatory frameworks underpin the structure on which the Framework Convention on Tobacco Control (FCTC) was built. The FCTC is a World Health Organization-led, international public health treaty designed to control tobacco demand and consumption.
Canada played a central role in developing the Convention and in its negotiation.
Health Canada, the Federal-Provincial-Territorial Tobacco Control Liaison Committee and the Canadian NGO community worked together to develop a comprehensive convention that would complement Canada's domestic approach to tobacco control. Following consultation with the provinces and territories, Canada ratified the FCTC on November 26, 2004 and it came into force on February 27, 2005.
~~PRICE MATTERS~~
The literature has shown that price plays an important part in determining both the decision to smoke and the frequency of use by continuing smokers. Tobacco consumption declines in direct proportion to the price paid by the consumer. The impact of higher prices has been shown to increase over time, since higher prices reduce the tendency to experiment with tobacco thus the resulting number of people who become addicted decreases. While higher prices reduce tobacco consumption in the short-term, it is the reduction in the affordability of experimentation that leads to the large long-term impact of higher prices.
A survey by Grossman et al, published in the Journal of Economic Perspectives, found that a 10% increase in the price of tobacco products reduces consumption in the long run by 4.5% to 7.5%.
The decline in consumption results from a combination of reductions in the total number of smokers, and in the number of cigarettes smoked by the remaining. This is important, since both trends have positive health impacts for Canadians.
Taxing tobacco at a high and sustainable level, thereby increasing costs, is an important element of a strategy to reduce smoking and improve health outcomes. Both the federal and provincial governments tax tobacco products and it is these combined taxes that affect the price of tobacco products, which influence an individual's decision to smoke. However, there are two critical additional factors at play.
First, while large price increases provide the impetus for some smokers to quit, it motivates others to seek out lower cost sources of tobacco. Substantial tax increases since 2001 have contributed to a remarkable decline in smoking rates over the same period. Despite this progress, many of the remaining smokers are turning to lower-cost legal (e.g. discount brands) and contraband sources of tobacco. This manifests itself on the legal side in a growing market share for discount cigarettes and, on the contraband side, in increased criminal activity.
Beginning in 2001, Canada's smaller cigarette manufacturers began introducing discount brands. Cartons of discount cigarettes sell, on average, for $10 to $20 less than premium brands. The public appetite for cheaper cigarettes quickly translated into increased sales of the discount brands. Once the increase in sales became apparent, two of the larger manufacturers quickly followed suit, lowering the price on two brand families. In 2005, 39% of current smokers reported buying a discount brand of cigarettes in the past 6 months.
Second, if organized criminal groups are able to bring lower priced contraband tobacco products to consumers, smoking will increase. The ability of tobacco taxation to reduce consumption is thus limited by our ability to control contraband, since consumption decisions are based on the effective price, not the legal price of tobacco.
Targeted Interventions are Key
The recent history of tobacco control strategies and programs illustrates the effectiveness of taking a targeted approach to smoking reduction and cessation efforts. When the first national survey on smoking
was conducted in 1965, the male prevalence rate was 61% and the female rate stood at 38%. The latest figures show that the numbers for both genders have decreased dramatically in the intervening years, to 22% and 16% respectively. The decline in smoking rates has been experienced both by males and females, but the greatest gains have been seen among men. One reason for the difference has been the targeting of males by the health community while the tobacco industry targeted women.
The history of high tobacco taxes in Canada has some twists and turns but may provide some interesting numbers/lessons.
Briefly....They had raised taxes in the early 90s....this resulted in some black market smuggling of tobacco products. To curb that, the govt then decided to lower them again, resulting in what's described in the following link....Since then, taxes have been raised again. Here's something that talks about tax revenue and also touches on the smuggling issue:
http://www.nsra-adnf.ca/cms/index.cfm?group_id=1197
The 1994 Tobacco Tax Cuts: Revenue Impact and Policy Alternatives
Summary
In February 1994, the federal government significantly decreased tobacco taxes in an effort to eliminate smuggling. It gave provinces an incentive to do the same.
The tax cuts resulted in combined federal and provincial revenue losses of more than $1.2 billion in fiscal year 1994-1995. The federal government lost $656 million, more than twice the amount predicted.
This analysis shows that governments were much better off financially prior to the tax cuts, even with the significant level of smuggling in evidence in late 1993.
Alternative anti-smuggling measures were recommended and available to the government. Some were promised but never implemented. The implementation of such measures would allow governments to return to pre-1994 taxation levels while minimizing smuggling, resulting in revenue recovery and health promotion.
Background: Health Impact
The impact of the tax cuts on tobacco consumption was dramatic:
* an estimated single-year expansion of the total tobacco market in Canada by approximately ten per cent
* a marked increase in smoking rates among youth
Revenue Impact
The revenue impact of the tax cuts, although less publicized than the health impact, was equally dramatic:
* the federal government lost $656 million between fiscal year 1994 and 1995, a decrease of 25%, and more than twice the predicted loss of $300 million;
* Ontario’s revenue decreased by 58%, a loss of $450 million;
* the total loss to all provinces which decreased taxes was nearly $600 million; and
* the combined federal/provincial revenue loss was over $1.2 billion.
The provinces which maintained their tax levels fared much better:
* British Columbia, Alberta and Saskatchewan saw their tobacco revenues increase.
* Manitoba’s revenues dropped by 6%, partly due to interprovincial smuggling from Ontario and Québec.
* Newfoundland’s revenues decreased marginally.
Policy Alternatives
Promised Measures
Along with the tax decreases, the federal government promised a number of anti-smug gling measures as part of the National Action Plan to Combat Smuggling. The two most significant were a tax on exports of Canadian tobacco products and better tax-paid markings on domestic cigarettes.
New markings have not materialized, despite mounting evidence that visible, hard-to- counterfeit markings on tobacco products can help decrease smuggling. The current export tax contains loopholes which make it ineffective as an anti-smuggling measure.
Other Alternatives
The Canadian Cancer Society and other national health organizations recommended numerous policy options to the government. The implementation of these measures would have allowed governments to maintain tax levels while substantially reducing smuggling.
Conclusions
The decision to decrease taxes was unnecessary in the face of other viable options to curb smuggling. The decreases caused irreparable health and revenue damage. However, governments can limit the damage by restoring tobacco taxes to pre-rollback levels, while finding alternative solutions to smuggling.
In December of 1995, the federal Minister of Health announced progressive, comprehen sive proposals for tobacco control. If these proposals are to achieve the goal of reduced tobacco use in Canada, the most effective tobacco reduction tool -- decreasing the affordability of tobacco through tax policy -- must be used.
The government can achieve its health goals and raise additional revenue by taking the following steps.
1. Create a climate where tobacco smuggling is unprofitable:
* implement all promised aspects of the anti-smuggling initiative, including an effective export tax and more prominent tax-paid markings on cigarettes and tobacco packages; and
* implement further strategies to reduce smuggling outlined prior to the rollback by the Canadian Cancer Society and other health groups.
2. Increase tobacco taxes to pre-rollback levels, thereby encouraging smokers to quit or reduce consumption and discouraging youth from starting.
Maybe this will clear up your question (which I didn't get at first, sorry) and Libra's post about the hike.
http://www.chron.com/disp/story.mpl/front/6352568.html
Snippets:
Now, federal taxes on a packet of rolling tobacco will be about $1 instead of 4.5 cents.
Yup...That's quite a price hike all right.
However, I guess I've seen it happen in Canada a number of times....So for me, it's "been there, done that".
Edited 4/2/2009 4:39 pm ET by moxysuvous
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I was responding to your statement in post number 15573.14 where you stated:
<<<<Just something to think about, though, if you're going to up someone's addiction cost by 300%.>>>>
It sounded to me that you were saying that the cost of cigarettes went up 300 percent.
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