Smokers are fuming over tax increases

Steven Stanek, Foreign Correspondent

• Last Updated: April 05. 2009 8:30AM UAE / April 5. 2009 4:30AM GMT

WASHINGTON // Wofford Handy, a 52-year-old furniture repairman who was taking a smoke break on Pennsylvania Avenue last week, remembers the good old days in the early 1990s when his packet of cigarettes cost $1.75 (Dh6.4)

“It’s outrageous,” said Mr Handy, a Virginia native, referring to a new federal tax increase that took effect on April 1, bringing the cost of a 20-pack of cigarettes in this area closer to $7. “It seems like they are targeting the smokers more than anyone else.”

Tobacco products – and those who use them – have increasingly been in the crosshairs of US legislators. The latest federal tax hike, from 39 cents per pack to $1.01 per pack, is the largest single increase. It was adopted this year as a way to fund the expansion of the State Children’s Health Insurance Program. It comes as several states, crippled by the recession, are considering raising local taxes on everything from chewing tobacco to cigars to generate much-needed cash.

The Florida Senate last week approved legislation adding $1 to its current 33-cent tax on a pack of cigarettes. In South Carolina, the state with the lowest cigarette tax at just 7 cents a pack, the House of Representatives last week backed legislation adding 50 cents to each pack of cigarettes. Meanwhile, about half of the US states have passed smoke-free laws since 2002, barring smokers from lighting up in public spaces, including bars and restaurants.

While the tax increases are opposed by the major tobacco companies, which will probably suffer revenue losses as a result, they are also proving unpopular with smokers such as Eric Pugh, 33, who had a menthol cigarette dangling from his lips as he stood on a Washington street last week.

Mr Pugh, who begrudgingly doled out the extra 62 cents for his pack of cigarettes, said that the increased cost could eventually make it difficult to pay for his habit. The tax hike, he said, might just be the thing to convince him to give it up.

“It’s going to persuade me to listen to my wife and try to quit,” he said.

And that’s precisely the point, at least according to health officials and anti-smoking advocates.

A 10 per cent increase in price leads to about a four per cent reduction in consumption by adult smokers and a seven per cent reduction in the number of youths who are likely to become smokers, according to Terry Pechacek, associate director of science at the Centers for Disease Control and Prevention’s Office on Smoking and Health. The new federal tax is expected to cause one million adult smokers to stop while preventing another two million young people from ever taking up the habit. There are about 45 million adult smokers in the United States.

“It’s a strong, clear signal of the commitment of the US public health community toward ending this tobacco epidemic,” Dr Pechacek said.

It may already be working.

Calls to the national quit-smoking hotline, which provides counselling to potential quitters, soared last month as smokers were preparing to face the new tax. In January, the hotline registered some 77,000 calls; in February, there were 91,000 calls; in March, the number jumped to more than 200,000, a record for that month.

“People were seeing this coming,” said Linda Bailey, president of the North American Quitline Consortium, who noted that a pre-emptive price hike last month by Philip Morris USA, the nation’s largest cigarette maker and creator of Marlboro, likely contributed to the trend.

“We were really amazed in a positive way to see the kind of increase we got in February and March, and we expect there will be increased volume in April as well as May as the tax goes into effect,” Ms Bailey said.

US tobacco companies, however, have been less positive. William Phelps, a spokesman for Altria Group, the parent company of Philip Morris, said the tax increase could result in several “unintended consequences” including increased counterfeiting and illegal cigarette smuggling. He said the measure will also lead to a loss of jobs at a time when Americans can ill afford to be out of work.

“We are disappointed that Congress chose to enact such a large tax increase that we believe will increase unemployment within the tobacco industry as well as other industries related to the tobacco industry,” he said.

Maura Payne, a spokeswoman for North Carolina-based RJ Reynolds Tobacco Company, which manufactures Camel and Pall Mall cigarettes, said her company is “vigorously opposed” to the tax hike because, among other things, it will disproportionately impact poorer families.

“Tobacco taxes are paid by people who tend to be lower- or middle-income, 55 per cent of smokers are either below the poverty line or among the working poor,” she said, adding that so-called “sin taxes” – a name also used for surcharges on alcohol – are “politically expedient” ways for legislators to raise money.

“You won’t see people rise in the streets in opposition to a tax that is being characterised a sin tax,” she said. “Particularly when it’s [paying for] a very laudable and much-needed programme within the state.”

Also last week, the US House of Representatives approved new legislation that would give the Food and Drug Administration broad powers to regulate the tobacco industry. The measure, which has the support of President Barack Obama – an occasional smoker, though he has vowed to quit – would allow the FDA to oversee everything from the ingredients of cigarettes to the marketing of certain brands. The law would also ban sweet-flavoured cigarettes and restrict companies from suggesting that “light” or “low tar” cigarettes are safer.

Some tobacco companies, such as Philip Morris, have welcomed the measure. Mr Phelps said it would ensure that all US tobacco companies are “operating at the same high standards”. But Ms Payne, of RJ Reynolds, said her company opposes it because it gives “extraordinary powers” to the FDA.

Danny McGoldrick, vice president of research at the Campaign for Tobacco Free Kids, said the FDA legislation, which still must be approved by the Senate, and the new taxes amount to “more than the federal government has done on tobacco, ever”.



sstanek@thenational.ae