Wv smokeless tobacco tax 11 26-12 ann boonn

The Most Effective Way to Tax
Smokeless Tobacco Products in
West Virginia
West Virginia Conference and Smokeless and Spit Tobacco
November 29, 2012
Ann Boonn, Associate Director, Research
aboonn@tobaccofreekids.org, (202) 296-5469

1

Campaign for Tobacco-Free Kids www.tobaccofreekids.org

What are we going to talk about?

1. The problem
2. How to best tax smokeless tobacco
3. Industry involvement
4. Resources

If we have time: Responses to common industry
arguments

2


THE PROBLEM

3


National Youth Smoking and Smokeless Tobacco Use
1997 - 2011
40%
37.7% All High School Students Smokeless Tobacco Use
High School Males Smokeless Use
All High School Students Cigarette Smoking
35%
36.4% High School Males Cigarette Smoking

30%
High school boys’
smoking declined 8.7%
25% from 2003-2011.
21.8%
19.9% Overall high school
20% 21.9% smoking declined 17.4%
from 2003-2011.
18.1%
15%
15.8% High school boys’
smokeless use increased
12.8%
10%
11.0% 16.4% from 2003-2011.
9.3%
5% 6.7% smokeless use increased
14.9% from 2003-2011.
0%

1997 1999 2001 2003 2005 2007 2009 2011
4
Source: CDC, Youth Risk Behavior Surveillance Survey.

Youth Smoking, Smokeless Tobacco Use in West Virginia
1997 - 2011
45%
42.4% All High School Students Smokeless Tobacco Use
High School Males Smokeless Use

40% 41.9% All High School Students Cigarette Smoking
High School Males Cigarette Smoking

35% High school boys’
smokeless use increased
30%
9.4% from 2003-2011.
31.0% 28.5%
25.5% High school boys’
25% 25.6%
smoking declined 14.8%
21.8% from 2003-2011.
20%
23.3%
15% smoking declined 33%
15.8%
14.4% from 2003-2011.
13.6%
10%

Overall high school
5% smokeless use increased
5.9% from 2003-2011.
0%

1997 1999 2001 2003 2005 2007 2009 2011
5
Source: CDC, Youth Risk Behavior Surveillance Survey.

What’s behind these trends?

• Products
• Marketing
• Price

6


7


Most popular snuff brands among 12-17 year olds
who have ever used snuff, 1999-2010
50%
Skoal Copenhagen

45% Grizzly Kodiak

40%

2010 Top 3 Most Popular Moist Snuff
35%
Brands among 12-17 year olds

30% 1. Grizzly (Reynolds American, via American
Snuff Company)

25% 2. Copenhagen (Altria, via UST)
3. Skoal (Altria, via UST)
20%
Source: 2010 NSDUH

15%

10%

5%

0%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Source: Analysis of NHSDA, NSDUH data 8


Definitions
Rates

THE BEST WAY TO TAX SMOKELESS
TOBACCO
10


WV’s Current Tobacco Products Definition

(6) "Other tobacco product" or "tobacco products other
than cigarettes" means snuff and chewing tobacco and
any other tobacco product that is intended by the seller
to be consumed by means other than smoking and any
cigar, pipe tobacco or other tobacco product other than
cigarettes.
WV Code §11-17-2

11


WV’s Current Tax on Smokeless Tobacco

• 7% of the wholesale price
• Last increased on January 1, 2002
• Revenues to the general fund

WV Code §11-17-3

12


Percentage of Price vs. Weight-Based for
Moist Snuff Tobacco

Simple
Simple Weight- Percentage-of-Price
Percentage-of-
Based with Minimum Tax
Price
Adequately and fairly taxes all
moist snuff brands
Depends  
Adequate tax paid on a pack of
low-weight moist snuff
Depends  
Revenue increases with
consumption increases   
Revenue increases with inflation   
Revenue increases with industry’s
price increases   

13


Adequately and fairly taxes all moist snuff
brands?
Simple
Percentage-of-
Price
moist snuff brands
Depends  

From an Altria presentation in KS, 2009:

0.24/2.39 = 10% 0.24/0.86 = 28%

14


Adequate tax paid on a pack of low-weight
moist snuff?
Simple
Percentage-of-
Price
Depends  

15


moist snuff?

Large Camel Snus UST Skoal Pouches UST Skoal Snus
1 tin (15 pouches) = 0.53 oz. 1 tin (20 pouches) = 0.82 oz 1 tin (15 pouches) = weight unknown

Regular-sized Camel Snus
1 tin (15 pouches) = 0.32 oz.

Marlboro Snus
1 “foil pack” (6 pouches) = 0.1 oz.
Traditional Moist Snuff Smokeless 1 tin (15 pouches) = weight unknown
1 tin = 1.2 to 1.5 oz.

Stonewall Hard Snuff
1 box of 20 Pieces = 0.335 oz.
Camel Dissolvables (test market)
Marlboro & Skoal Sticks (test market)
1 package of 12 Pieces = 0.10-0.21 oz.
16
1 pack of 10 Sticks = weights unknown

moist snuff?
Simple
Percentage-of-
Price
Depends  
10% wholesale $0.20/ounce Minimum tax equal to a
$1.00 per-pack cigarette tax

$0.24 $0.24 $1.00

Traditional Moist Snuff Smokeless
1 tin = 1.2 to 1.5 oz.

$0.10 $0.024 $0.30

1/10th the weight = 1/10th the revenue
Marlboro Snus
1 “foil pack” (6 pouches) = 0.1 oz.
17


Under weight-based, revenues decline as low-weight
smokeless products make up more of the market.
Revenue Losses From Standard Weight-Based Tax on Moist Snuff (in
constant dollars)

$100

$90

$80

$70

$60

$50
Base Year Year 1 Year 2 Year 3 Year 4 Year 5

Projections assume stable consumption and sales over time, with inflation at 2% per year. 18


Altria/UST’s Proposed Minimum Tax

Their Language:
“The tax imposed on a can or package of moist
snuff that weighs less than 1.2 ounces shall be
equal to the amount of tax imposed on a can or
package of moist snuff that weighs 1.2 ounces.”

The Problem:
Extremely large packages
Small tax per dose

19


Single-Unit/Single-Dose Products

= = = = =

20


Revenue increases with consumption
increases?
Simple
Percentage-of-
Price
Revenue increases with
consumption increases   
Weight-Based Tax Percentage-of-Price Tax Percentage-of-Price w/ Minimum

$140.0

$130.0

$120.0

$110.0

$100.0

[Based on actual 2000 to 2005 moist snuff sales price and volume data for from the U.S. Federal Trade Commission, and
on recent industry data on the moist snuff market share and average prices of premium, value and discount brands.] 21


Percentage of Price vs. Weight-Based for
Moist Snuff Tobacco
Simple
Percentage-of-
Price

Revenue increases with inflation   
Revenue increases with industry’s
price increases   
Weight-Based Tax Percentage-of-Price Tax Percentage-of-Price w/ Minimum

$140.0

$130.0

$120.0

$110.0

$100.0

[Based on actual 2000 to 2005 moist snuff sales price and volume data for from the U.S. Federal Trade Commission, and 22
on recent industry data on the moist snuff market share and average prices of premium, value and discount brands.]


Weight-Based Taxes
Harm Reduction

INDUSTRY’S INVOLVEMENT

23


Source: Common Cause 24


Harm Reduction

• What is it?
• The problems with harm reduction
• Harm reduction and taxes
– Kentucky, Indiana, Kansas, Illinois

25


26


27


WHAT YOU CAN DO

28


Educate the Public

1. Lower prices = higher
prevalence, especially
among youth, no matter
what type of tobacco
product

2. Tax discrepancies
encourage people to
switch to lower-priced
products

3. Problems with a simple
weight-based tax system
29


Kentucky voters overwhelmingly favor taxing
other tobacco products at a rate comparable to cigarettes.
“Currently, other tobacco products such as cigars and smokeless, or spit tobacco, are taxed at a lower rate
than cigarettes. Regardless of whether or not there is an increase in the cigarette tax, do you favor or
oppose taxing other tobacco products such as cigars and smokeless, or spit tobacco, at a rate comparable to
cigarettes?”
Overall By Smokers
Total Favor: 82%* +41% +72%
Total Oppose: 17% 85%

70%
Strongly
Favor
67%

DK 29%
1%
Strongly 13%
Oppose
13%

Smwht Smokers Non-Smokers
Oppose (25%) (75%)
Smwht
4%
Favor Total Favor Total Oppose
* Denotes Rounding 14%
Kentucky Statewide Tax Survey, Conducted by Public Opinion Strategies, December 15th – 16th, 2008

Montana Voters Support an Increase
On Taxes on Cigars and Smokeless
“Currently, other tobacco products such as cigars and smokeless, or spit tobacco, are taxed at a
lower rate than cigarettes. Regardless of whether or not there is an increase in the cigarette tax,
do you favor or oppose taxing other tobacco products such as cigars and smokeless, or spit
tobacco, at a rate comparable to cigarettes?” (Q15)
100%

78%
80%

60%

40%

19%
20%
3%
0%
Favor Don't know Oppose

Montana Statewide Tobacco Survey, January 18-19, 2011

TFK Tax Resources

• Factsheets, Reports
– general and specific to state/locality
• Polling
• Model Legislation and Legislative Drafting
Assistance
• Media Resources
– ads, sample LTEs, Ed Board memos
• Grassroots Resources
– microsites, educational flyers, action alerts, social
networking tools
32


Ann Boonn
aboonn@tobaccofreekids.org
(202) 296-5469

Factsheets:
http://www.tobaccofreekids.org/facts_issues
/fact_sheets/policies/tax/other_products/

33


RESPONSES TO COMMON
INDUSTRY ARGUMENTS
34


Industry Claim: Industry price reductions will
reduce states’ revenues

Response:
• Industry increases its prices more often than it
reduces prices.
• Under a percentage-of-price rate, the
revenues will still increase with inflation,
whereas under a weight-based rate, revenues
will decline.

35


Industry Claim: Weight-based taxes create a
stable and predictable funding stream of tax
revenue for the state.

Response:
• Any tobacco tax creates steady and predictable
revenue for states.
• Revenues from weight-based taxes will decline over
time despite price increases and as more people
switch to the new generation of low-weight
smokeless products.

36


Industry Claim: Weight-based taxes are more
fair than percentage-of-price taxes.

Response:
• Percentage-of-price taxes are flat across all
products.
• Under a weight-based system, cheaper
products will be paying a higher percentage of
their price in tax, while more expensive
products pay a lower percentage of their price
in tax.

37


Adequately and fairly taxes all moist snuff
brands?
Simple
Percentage-of-
Price
moist snuff brands
Depends  

From an Altria presentation in KS, 2009:

0.24/2.39 = 10% 0.24/0.86 = 28%

38


Industry Claim: Smokeless tobacco should be
taxed based on risk level.

Response:
• Smokeless tobacco is still harmful and making
them cheaper makes them more accessible
and affordable to youth.
• If FDA finds certain smokeless products to be
less harmful to the public at large, then that
“modified risk” claim should be enough to
encourage people to use smokeless tobacco,
not the tax rates.
39


Industry Claim: Weight-based taxes reduce the
state’s administrative burden.

Response:
• The state is already collecting it this way and
has been doing so for years, so any change
would be an administrative burden at this
point.

40


Wv smokeless tobacco tax 11 26-12 ann boonn

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