Oregon and Alaska recently jacked up their tobacco taxes. Cigarette sales are down. More and more states are doing the same as they've settled lawsuits against the tobacco industry.
Will higher taxes win the war on tobacco?
Higher taxes do affect smokers, causing them to quit, cut back or switch to cheaper brands. Unlike other tax increases, the public also doesn't seem as resistant to higher tobacco taxes because smoking isn't tolerated as much as it used to be.
But most experts doubt tax hikes alone will stamp out smoking, partly because they don't address why people, particularly teen-agers, start smoking in the first place. Boosting taxes high enough to affect all smokers can also force them onto the black market and increase crime.
Public- health advocates and politicians have increasingly turned to cigarette taxes as a way to discourage smoking. In part, that's because they see a rise in teen smoking this decade as adult smoking has held steady. During this time, the anti-smoking campaign has reached a fever pitch. If people can't be convinced to stop smoking, the idea goes, maybe they need to be coerced.
"Most of the people who can be reached with the message that smoking is dangerous have been reached," said Jacob Sullum, author of "For Your Own Good" (The Free Press, 1998), a book about the war on tobacco.
"So how do you get the rest of the people to stop smoking? You have to make it much more inconvenient, much more expensive and much less socially acceptable," Sullum said.
There's little doubt that anti-smoking advocates are relying on cigarette taxes as a way to discourage people from lighting up.
Federal taxes on cigarettes will rise by another 15 cents by 2002, up from the current 24 cents. President Clinton recently called for an extra 55-cent federal tax.
States, where cigarette taxes range from about 3 cents a pack to $1 a pack, are also piling on. Last November, Californians OK'd a 50-cent hike in the tax hike on a pack of cigarettes.
If the early results from Oregon and Alaska are repeated, those states that hike tobacco taxes significantly should see cigarette sales drop.
"There's no doubt that higher retail cigarette prices lead to lower legal volume," said Martin Feldman, tobacco analyst at Salomon Smith Barney in New York.
"As the tobacco settlement obligations kick in, the volumes in the U.S. will fall," he said. "In many other markets where taxes have been raised, legal volumes fall, but the number of people who smoke doesn't change as much. Either they smoke less or trade down to cheaper cigarettes."
In 1997, for example, Alaska joined Hawaii as the state with the highest cigarette tax, at $1 a pack. That was up from 29 cents in 1996. In the 1998 fiscal year, taxable sales of cigarettes dropped by 5%, or 48 million cigarettes. So far in the 1999 fiscal year, taxable sales are down 17%.
A quick glance at Alaska's experience suggests that smokers respond to higher prices. In the month before the tax took effect, Alaskan smokers stockpiled cigarettes, causing sales to jump 159% higher than normal. After the increase, sales fell in the state.
"Unlike in other states, none of that tax money went into tobacco prevention and control efforts," said Catherine Schumacher, an official with the Alaska Division of Public Health. "So the decline we're looking at is basically due to the taxes. People seem to be cutting back or quitting."
Likewise, Oregon more than doubled its cigarette taxes in 1996, up to 68 cents a pack. By 1998, 25 million fewer packs were sold in Oregon, a drop of 11.3% per person.
It's unclear how much further sales will drop. For example, when California raised its tobacco tax back in 1989, cigarette sales dropped sharply, according to a 1998 study in the Journal of American Medical Association. But the downward trend leveled off five years later.
Neither Alaska nor Oregon is sure how the tobacco taxes affected teen smoking. And some experts say the tax increases won't have much impact.
Why not? The reasons are controversial.
One study by researchers at Cornell University suggests that teens aren't as concerned as adults about an increase in cigarette prices.
A 20-cent-a-pack tax hike would reduce the number of teen smokers by less than half a percentage point, the study found. Raising cigarette taxes by $1.50 would cut it by about 2 percentage points - far less than the 40% to 50% decline touted by many politicians.
"We found very little evidence that higher taxes were discouraging teen- agers, particularly, from starting the smoking habit, even though higher prices through taxes do affect adults," said Don Kenkel, associate professor at Cornell's College of Human Ecology and co-author of the study.
The difference may be that teen-agers are deciding whether to start smoking, while adults are often deciding whether to cut back or quit. Teen-agers' penchant to buy expensive premium brands suggests they aren't motivated entirely by price.
"A teen-ager's decision to start smoking is based on a lot of factors, and many of those may be much more salient than the price or the tax on cigarettes," Kenkel said. "If being cool costs a couple of dollars more per week, a lot of kids will pay that price."
The reason could also be that taxes simply aren't high enough. "It doesn't necessarily mean that a much higher tax than what we studied would have no effect," he said. "At some point it's going to matter, we're just not sure when."
Two studies, one by the National Academy of Sciences and another by the Advisory Committee on Tobacco Policy and Public Health, argued that taxes would have to go to $2 a pack before they'd have a big impact on teen smoking.
But raising taxes that high would likely have an unintended effect: It would create a black market for cigarettes.
To a certain extent, one already exists. Americans who live in states with high cigarette taxes often buy cigarettes in low-tax states.
For example, when Michigan raised its cigarette tax by 50 cents a pack in 1994, its taxable sales fell by 21%, according to research by the Tax Foundation in Washington D.C.
Yet at the same time, sales in nearby low-tax states, like Indiana, rose 8.5%, reversing several years of decline.
Likewise, Alaska's recent tax hike has been accompanied by a 68% jump in cigarette sales on Indian reservations, where tribes don't pay (or charge) cigarette taxes.
While that can't account for the statewide decline in cigarette sales, it is large enough that the state wants to make a deal with tribes, capping how many tax-exempt cigarettes they can buy each year.
When Canada and its provinces raised cigarette taxes by as much as C$3 per pack in the late 1980s, there was a big increase in smuggling from the U.S., according to a 1998 study by the General Accounting Office. The GAO said contraband smokes made up as much as 60% of the market in Quebec.
The resulting crime was a big enough problem to prompt Canadian provinces to cut tobacco taxes.
"The more expensive you make smoking, the more people will try to find ways around it," Sullum said.
Other public-health advocates, like Jeff Stier, associate director of the American Council on Science and Health in New York, think the answer to teen smoking doesn't lie with higher taxes.
"The real motivator (in curbing teen smoking) is going to be better information," Stier said.
Surveys show that teen-agers know that smoking is bad for them. According to the University of Michigan's Monitoring the Future Study, 71% of 12th-graders said smoking a pack a day put a person at "great risk."
That share has increased steadily over the past two decades. Nearly as high a percentage said that they disapprove of smoking.
"When teen-agers begin smoking, they know it's dangerous, but they don't think it's dangerous for them and they don't know how soon it becomes dangerous," Stier said. In other words, the public-health lobby is up against something most parents have known forever: Teen-agers think they're immortal.
While Cornell's Kenkel is encouraged that teen smoking fell slightly last year, he's more pessimistic about what can be done to cut back on teen smoking.
"Throughout the 1990s, teen- age smoking was going up while we were trying all kinds of policies to make it go down," Kenkel said. "It suggests we don't know very much about how to do that."
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