Tax Hikes and Teen Smoking

Senate committee votes this week on a $1.10-per-pack tax on cigarettes to curb smoking.

If Congress wants to curb teenage smoking by effectively raising cigarette prices to about $3 per pack, it's probably on the right track.

Around the nation, the states that have boosted cigarette prices with higher excise taxes have seen their teen smoking rates reduced the most. And, in Canada, after federal taxes on cigarettes rose by 150 percent over 10 years, teen smoking rates fell by 60 percent.

"Increasing the price is one of the few ways we know of that reduces teenage smoking," says Rick Kropp, a prevention consultant.

A tax hike, ultimately pushing up the cost of a pack of cigarettes by $1.10 over the next five years, is the cornerstone of comprehensive legislation introduced March 30 by Sen. John McCain (R) of Arizona. Senator McCain hopes that the tax hike - supported by the Clinton administration and coupled with other measures - would finally start to arrest the rising trend of teenage smoking.

A study released last week by the US Treasury forecasts a tax hike of $1.10 per pack would reduce teen smoking by 42 percent by 2003. Smoking rates among teens are now at a 19-year high with almost 37 percent of high school seniors using tobacco.

Some teenagers are not so sure that a tax hike will make them quit smoking. Mario Berutti, a senior at Hollywood High School in Los Angeles, says the tax hike would just mean he would have to work harder to pay for his habit. To cut down on smoking, he suggests pushing prices up to $6 a pack, "and concentrate on the Marlboros because that's what most of my friends smoke."

The McCain bill, if passed, would have consequences well beyond the price of cigarettes. It also calls for "protocols," or voluntary agreements, from the tobacco companies to restrict marketing and advertising in return for a $6.5 billion annual cap on liability payments. It would give broad authority to the Food and Drug Administration to regulate advertising and new products. And, the bill penalizes the industry if it fails to meet predetermined targets for reducing youth smoking.

Altogether it is a tougher bill than the agreement the state attorneys general reached with the industry last year because it does not protect the industry from lawsuits. "It's an improvement over the settlement, but we think it will still require some improvements," says Kathryn Kahler Vose of the Campaign for Tobacco-Free Kids in Washington.

But the tobacco industry is likely to fight the bill's passage. It dislikes the lack of protection from the class-action lawsuits and liability lawsuits that are expected in the decades ahead. Without the industry's support, it's not clear that the bill's marketing and advertising segments will survive First Amendment court challenges. And the industry complains that the tax increase will result in a big contraband market despite antismuggling provisions in the bill.

Public-health advocates, while applauding the direction of the legislation, are complaining that the tax hike is not high enough or fast enough. They prefer an increase of at least $1.50 a pack within three years. "This new proposal is inadequate to protect public health. For our children it simply achieves too little and gives the tobacco industry too much," says John Garrison, managing director of the American Lung Association.

Another Hollywood High School senior, Nancy Villatoro says even a tax increase of $1.50 a pack won't make any difference to her since she "bums" all her cigarettes. But, she adds, "I don't think it will make any difference, though, because I have friends who won't have any food, but they always have their cigarettes with them."

Such talk is not unusual, says David Sweanor, a lawyer for the Ottawa, Canada-based Non-Smokers' Rights Association. He says teenagers often claim that advertising does not influence their behavior but then will buy a product worn by a celebrity. Instead, he says, the Canadian experience with taxes might be a better judge of what will happen.

Over a 10-year period, starting in 1982, the federal government in Ottawa increased taxes by 6 cents per cigarette. Combined with some provincial tax hikes, the price of cigarettes rose by 150 percent. As prices rose, teenage smoking rates - among the highest in the world - fell from 42 percent to 16 percent. The declines carried through to young adults, too.

"We used price to protect the kids till their late teens, by which time something horrible happened - they became sensible and receptive to health information," says Mr. Sweanor.

But the Canadian story does not end here. In 1993, faced with huge amounts of bootlegged cigarettes, the Canadians rolled the tax back. Since then, the smoking rates for teenagers have risen back to nearly 20 percent.

EVEN with the hike, the US cigarette tax rate lags behind that of most European countries. The United Kingdom, where a pack of cigarettes costs about $5.50, derives more money from tobacco taxes than the US does. Some states in this country have been steadily increasing their own sales tax. Alaska has recently enacted a $1-per-pack sales tax and Hawaii is planning to do the same. After the sales tax was significantly increased in California, smoking rates fell. "California leads the country," says Mr. Kropp, a Santa Rosa, Calif., consultant with his own firm, Tobacco Prevention and Policy Resources.

James Blair in Los Angeles contributed to this story.

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