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June 11th, 2007:

Raising Cigarette Taxes Reduces Smoking

RAISING CIGARETTE TAXES REDUCES SMOKING, ESPECIALLY AMONG KIDS (AND THE CIGARETTE COMPANIES KNOW IT) – FULL REPORT HERE

The cigarette companies have opposed tobacco tax increases by arguing that raising cigarette prices would not reduce adult or youth smoking. But the companies’ internal documents, disclosed in the tobacco lawsuits, show that they know very well that raising cigarette prices is one of the most effective ways to prevent and reduce smoking, especially among kids.

  • Philip Morris: Of all the concerns, there is one – taxation – that alarms us the most. While marketing restrictions and public and passive smoking [restrictions] do depress volume, in our experience taxation depresses it much more severely. Our concern for taxation is, therefore, central to our thinking …
  • Philip Morris: When the tax goes up, industry loses volume and profits as many smokers cut back.
  • RJ Reynolds: If prices were 10% higher, 12-17 incidence [the percentage of kids who smoke] would be 11.9% lower.
  • Philip Morris: 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.
  • Philip Morris: Jeffrey Harris of MIT calculated…that the 1982-83 round of price increases caused two million adults to quit smoking and prevented 600,000 teenagers from starting to smoke…We don’t need to have that happen again.
  • Philip Morris: A high cigarette price, more than any other cigarette attribute, has the most dramatic impact on the share of the quitting population…price, not tar level, is the main driving force for quitting.

The cigarette companies have even publicly admitted the effectiveness of tax increases to deter smoking in their required filings with the U.S. Securities and Exchange Commission.

  • Philip Morris: Increases in excise and similar taxes have had an adverse impact on sales of cigarettes. Any future increases, the extent of which cannot be predicted, may result in volume declines for the cigarette industry.
  • Loews/Lorillard Tobacco: Significant increases in federal and state excise taxes on cigarettes . . .have, and are likely to continue to have, an adverse effect on cigarette sales.
  • R.J. Reynolds: Substantial increases in state and federal excise taxes on cigarettes. . . have had and will likely continue to have an adverse effect on cigarette sales.

Economic Research On Cigarette Tax Increases Reducing Smoking.

Numerous economic studies in peer-reviewed journals have documented that cigarette tax or price increases reduce both adult and underage smoking. The general consensus is that every 10 percent increase in the real price of cigarettes reduces overall cigarette consumption by approximately three to five percent, reduces the number of young-adult smokers by 3.5 percent, and reduces the number of kids who smoke by six or seven percent. 8 Research studies have also found that:

  • Among all adults or all youths, cigarette price increases work even more effectively to prevent and reduce smoking among males, Blacks, Hispanics, pregnant women, and lower-income persons.
  • Cigarette price increases not only reduce youth smoking but also reduce the number of kids who smoke marijuana and the amount of marijuana consumed by continuing regular users.
  • Higher taxes on spit tobacco reduce its use, particularly among young males.