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Tobacco Tax Revenue More Predictable

(January 27, 2015)

New Study Shows Tobacco Tax Revenue More Predictable
and Stable than Other State Revenues

Advocates call on Governor and Lawmakers to Improve the Health
of Ohioans While Raising Revenue for the State

Columbus, OH—As Governor Kasich prepares to deliver his budget proposal to the General Assembly, a report released today by a nationally recognized expert on tobacco and public health issues confirms that significant tobacco tax increases in Ohio will produce a large, sustained increase in state tobacco tax revenues.

“Ohio’s smoking rates have been on the rise while the national smoking rate is declining,” said Shelly Kiser, Director of Advocacy for the American Lung Association in Ohio. “The report released today (January 27) confirms that increased tobacco taxes will provide the state a reliable, sustained revenue source while keeping kids from starting to smoke and encouraging smokers to quit.”

Health advocates are calling on Governor Kasich and the Legislature to increase the state cigarette tax by $1 per pack, with no phase‐in, increase the tax on other tobacco products to an equivalent rate, and invest some of the additional revenue in tobacco use prevention and cessation programs.

“A $1.00 cigarette tax increase would prevent 65,000 kids from becoming smokers and prompt more than 73,000 adult smokers to quit. It would also prevent more than 40,100 smoking caused deaths,” said Kiser. “At the same time, the cigarette tax increase would bring in approximately $342 million in new annual revenue and save $2.67 billion in long‐term health care cost. This is a win‐win for Ohio.” 

Dr. Frank Chaloupka, a well‐respected economist and tobacco policy expert at the University of Illinois at Chicago, developed the report in conjunction with the Investing in Tobacco Free Youth Coalition. The key findings of the report are:

  • Significant cigarette excise tax increases generate significant increases in cigarette tax revenues.
  • After the rate increase, the level of tobacco tax revenue will remain higher than without a rate increase, despite ongoing declines due to reduced tobacco use.
  • Tobacco tax revenues are more predictable and stable than other state revenue sources.
  • Allocating some of the revenues from the rate increase to state comprehensive tobacco control programs will reduce tobacco use, but the resulting slow declines in revenue will be offset by reductions in health care costs due to tobacco‐related diseases.

The study provides direct evidence from actual state experiences confirming that significant cigarette tax increases have always produced substantial amounts of new revenues both immediately and over extended periods of time, and despite related decreases in state tobacco sales.

“This report is the latest in decades of research demonstrating that increasing tobacco taxes will save lives and bolster state revenues,” said Beverly May, Regional Director for the Campaign for Tobacco‐Free Kids. “With the eighth highest smoking rate in the country, Ohio’s leaders need to make reducing tobacco use in Ohio one of its highest priorities. Let’s join with leaders in other states like Kansas and Utah who are considering tobacco tax increases to protect the health and well‐being of their residents.”

Currently, 23.4% of Ohio adults smoke compared to the national average of 17.8%. Each year, tobacco claims 20,200 Ohio lives and costs $5.6 billion in health care bills.

The full report can be found at http://tobacconomics.org/research/ohio2015.

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Dr. Frank Chaloupka is a Distinguished Professor of Economics at the University of Illinois at Chicago’s College of Liberal Arts & Sciences and its School of Public Health’s Division of Health Policy and Administration. He also directs the University’s Health Policy Center, is a Research Associate in the National Bureau of Economic Research’s Health Economics Program and Children’s Research Program.  He is the Director of ImpacTeen, a research program involving nationally‐recognized experts dedicated to studying youth tobacco use, other substance abuse, and other health behaviors; and he is Director of Tobacconomics, a group of economists and other policy researchers focused on the economics of tobacco and tobacco control globally. Dr. Chaloupka has written numerous studies, book chapters, and other publications that evaluate efforts to prevent and reduce tobacco use, with a special focus on the impact of cigarette and other tobacco product tax increases.

Investing in Tobacco‐Free Youth is a coalition supported by a diverse group of organizations spearheading a campaign to reduce the burden of tobacco use in Ohio. The coalition is led by the American Cancer Society Cancer Action Network, American Heart Association, American Lung Association, and the Campaign for Tobacco‐Free Kids.

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