Policy Statement:  12/06/06 Increase the Price of Tobacco Products	Printable Version (PDF)

Position

The South Dakota Tobacco-Free Kids Network supports initiatives that increase the price of tobacco products, including increases in the state tax on tobacco products, as a mechanism to decrease tobacco consumption, especially among children and pregnant women, and to provide a means of funding comprehensive tobacco prevention and cessation programs. 

Background

Increased tobacco taxes reduce tobacco use, especially among children and pregnant women, while increasing revenue.

The Institute of Medicine of the National Academy of Sciences, a National Cancer Institute Expert Panel on cigarette excise taxes, and the tobacco industry itself, have stated that increasing tobacco prices is probably the most effective deterrent to tobacco use.[i]

·         Economic research studies over the past 15 years conclude that every 10% increase in the real price of cigarettes will reduce total adult smoking by 4% and reduce teen smoking by roughly 7%.[ii]

·         Studies also show that higher excise tax rates reduce smoking rates among pregnant women.  Every 10% increase in the price of cigarettes will reduce smoking among pregnant women by 7% and reduce smoking-related health complications among pregnant women and their infants.[iii]

·         Studies show that a 10% increase in smokeless tobacco prices reduces adult consumption by 3.7% and reduces male youth consumption by 5.9%, with two-thirds of the reduction coming from kids stopping any use of smokeless tobacco at all.[iv]

Many states have taken action to increase tobacco taxes to reduce tobacco use and provide a source of revenue to offset deficits and fund health programs.

Forty-three states, including South Dakota, have raised their cigarette taxes since January 2002.   South Dakota’s most recent tax increase went into effect on January 1, 2007. Twenty-two states, as well as Guam, Puerto Rico, and Northern Marianas, have a tobacco cigarette tax of $1.00 or more per pack.  The average state tax on a pack of cigarettes is now  $1.00.[v]  These price increases will result in fewer teen smokers, a reduction in future health care costs and a significant increase in state revenues. 

Increasing the state tobacco tax should be a part of the state’s comprehensive strategy to reduce tobacco use in South Dakota.

Price increases alone are not sufficient to sustain reduced levels of tobacco use. They must be coupled with efforts to reduce exposure to secondhand smoke, community and school based programs, counter-advertising, active enforcement, and cessation and healthcare services to reduce the impact of tobacco use on the state.

Evidence from other state and national experiences: 

·         In 2003, South Dakota raised its cigarette tax by 20 cents to 53 cents per pack (a 5.4% increase in total price).  As a result, cigarette consumption declined by 3.5% and state revenues increased by 23% ($5.9 million in new revenue). In contrast, smokeless tobacco consumption in South Dakota increased 2.9% over the same period.[vi]

·         In 1995, South Dakota raised its cigarette tax by 10 cents to 33 cents per pack.  As a result, consumption declined by 5.6% and state revenues increased by 40% ($6.1 million in new revenue).[vii]

·         Canada provides a clear example of how increasing tobacco prices can reduce use.  From 1981 to 1992, due to several major cigarette tax increases, smoking declined by 38% overall and by 60% among teenagers.  Since 1994, the Canadian cigarette tax was sharply reduced.  According to the Canadian government, smoking has increased by nearly 10% after nearly 15 years of continuous decline.[viii]

·         In 2001, Wisconsin raised its cigarette tax by 18 cents  to 77 cents per pack. This resulted in a 7.6% decline in consumption, while state revenue increased over 20% or $50 million in new revenue.[ix]

·         In 2002, Illinois raised its cigarette tax by 40 cents to 98 cents per pack. As a result, consumption declined 27.6% and state revenue increased 38.5%[x].

·          Indiana raised its cigarette tax by 40 cents to 55 cents per pack in 2002, and state cigarette consumption declined 16.7% while revenues increased 206.5% or $227 million in new revenue.[xi]

South Dakota Tobacco-Free Kids Network, 12/06/06