Cigarette sales off since tax hike

The Arizona Republic
Monday, August 13, 2007
Amanda J. Crawford

When Arizona's cigarette tax jumped from $1.18 a pack to $2 in December, Donna Dear started reminding her husband that if they quit smoking, they could afford a nice vacation.

Dear, 55, of Laveen, didn't quit, but she went from 10 packs a week to six. With Congress now weighing the biggest federal cigarette-tax hike in history, Dear said the pressure on her pocketbook may soon be enough for her to kick her 30-year habit.

"Every time you buy a pack and you see the cost, it reinforces the fact that you have to quit," she said.

State officials say it's too early to tell whether the recent state tax hike and the new statewide smoking ban have curbed per capita smoking rates in Arizona. But tax officials say sales were down 23 percent in May and 15 percent in June from a year earlier. And a Web-based survey by the University of Arizona and Northern Arizona University found that 84 percent of smokers considered quitting after the tax hike and 28 percent quit for a day or more.

A new analysis by USA Today shows a correlation between declines in per capita smoking and the size of state-tax increases. In Connecticut, where taxes went up from 50 cents per pack to $1.51 per pack in 2002, per capita cigarette consumption has fallen 37 percent. By comparison, in South Carolina, which has the lowest tax in the nation at 7 cents per pack (unchanged since 1977), per capita consumption has fallen just 5 percent since 2000.

In Arizona, there was a sales decline similar to that in Connecticut after Arizona raised taxes 60 cents per pack in 2002. According to the Department of Health Services, per capita pack sales fell 46 percent from 2001 to 2006.

If Congress raises the federal levy on cigarettes as proposed, experts say the nation could see the largest one-time per capita decline in smoking ever.

"I expect a bigger drop than almost anything we've seen before," said Frank Chaloupka, a University of Illinois economist who has studied the effect of taxes on smoking.

Pricey habit
Congress wants to raise the federal tobacco tax to fund an expanded government health-insurance program for children. The program, called "KidsCare" in Arizona, provides low-cost health coverage to low-income children.

The U.S. Senate recently approved a 61-cent-per-pack hike; the House has proposed 45 cents per pack. President Bush is opposed to increasing spending on the program and has threatened a veto.

The state-tax hike approved by voters in November brought Arizona's levy to fourth-highest in the nation. Eighty cents per pack goes to early-childhood education and health programs. Two cents per pack funds enforcement of the smoking ban that went into effect in May and applies to most indoor public places.

Counselors and others who help people quit say they immediately saw increased interest in their programs.

Julie Berger, director and chief executive officer of LaserCare in Gilbert, which claims low-level laser therapy can help smokers quit, said she saw a 25 percent jump in business in the first few months.

"They were complaining about the cost of the cigarettes, saying it's becoming way too expensive," she said. "Some people weren't as concerned about their health as they were about the tax."

A state-funded hotline has received more calls because of the new tax and the smoking ban, program organizers say.

"It's fairly common that if you ask a person why they want to quit, the cost of smoking is one of the big motivators, whereas 10 or 20 years ago that hardly ever came into the picture," said Dale Gehring, program coordinator for Arizona Smokers' Helpline.

'One pack at a time'
Critics of tobacco taxes say the taxes tend to have more of an impact on the poor.

Industry groups predict increased black-market sales and thefts. They also warn that tax increases can backfire. If smoking declines, programs that depend on tax revenue could lose money.

"Using taxes to legislate the use of a legal product is not good public policy," said Thomas Briant, executive director of the National Association of Tobacco Outlets.

But the risk of losing tax revenue because of less smoking is a risk Sue Gerard, director of the Arizona Department of Health Services, said she is willing to take.

In her agency, tobacco taxes fund disease research, mental-health care and community-health centers. Tobacco taxes also support the state Medicaid system, schools and programs for low-income kids.

"If we got to a point that the level of smoking was so low that we didn't have money to do all these good programs we are doing, that is a problem I would be happy to face," Gerard said. "You would have such an effect on the overall health of our community. You'd see decreases in other costs."

But higher taxes are not enough to make everyone quit.

"Money is just never going to stop it," said long-time smoker Darin Griffin, 47, of Phoenix, as he walked through downtown Phoenix taking a drag. "Most of us live not in reality. We buy one pack at a time."