Economist touts revenue, health benefits of raising cigarette tax
Oklahoma would raise millions in new tax revenue and save thousands of lives by raising the cigarette tax to $1.50 per pack, a tobacco taxation expert said Tuesday.
Frank J. Chaloupka, an economist who has extensively researched tobacco taxation, said during a presentation at the Stephenson Cancer Center that, if the state raised its cigarette tax, Oklahoma could raise $184 million in new tax revenue, stop 28,200 children from taking up smoking and encourage 30,400 adult smokers to quit.
Additionally, almost 17,000 fewer Oklahomans would die from diseases caused by tobacco, he said.
Every state that raises tobacco taxes sees significant increase in revenues and even though the revenue declines over time, it’s slow and predictable, said Chaloupka, who serves as director of the World Health Organization’s Collaborating Center on the Economics of Tobacco and Tobacco Control.
“This is something where the revenues are going to be sustained over time,” he said. “This is a very conservative projection, where we assume that the revenues go down faster than they have in the past ... . Several years out, you’re talking about still hundreds of millions of dollars in additional revenues, compared to what would have been the case otherwise, so a real win-win-win for the states.”
Chaloupka was brought in by health leaders who want to see House Bill 1841 pass. The bill, authored by Rep. Leslie Osborn, R-Mustang, would raise Oklahoma’s cigarette tax by $1.50 per pack and direct that money into a health care revolving fund.
The first year after the bill’s passage, the money raised from the cigarette tax increase would go to state health agencies, including 45 percent of the money directed to the Oklahoma Health Care Authority, the state’s Medicaid agency, and 28 percent to the Oklahoma Department of Mental Health and Substance Abuse Services.
Health leaders say lawmakers’ support of the bill changes daily. The bill passed 17-10 out of the House appropriations and budget committee Feb. 13 and awaits a vote in the full House.
House Bill 1841 must pass the House and Senate by a three-fourths majority before making it to the governor’s desk.
Chaloupka spent part of Wednesday at the Capitol, talking with lawmakers about the potential impact of the cigarette tax.
Oklahoma first adopted a cigarette tax in 1933, at five cents per pack. The state last raised the tax in 2005, by 80 cents, to $1.03 per pack.
Chaloupka said cigarette taxes vary widely among states, ranging from 17 cents per pack in Missouri to $4.35 per pack in New York.
When states start discussing raising tobacco taxes, the same questions and concerns come up, Chaloupka said.
One concern that lawmakers have raised in Oklahoma is that, once the tax is increased, people will just cross the border to buy their cigarettes.
Chaloupka said research shows there is some truth to those concerns — raising the cigarette tax creates an incentive for tax avoidance and evasion. State’s have options, such as high-tech tax stamps, to fight that trend.
“What we see is, even though this goes on, when taxes go up, we still see the real public health benefits, and we still see the real revenue benefits,” Chaloupka said. “We don’t see them as big as they would have been otherwise, but they’re still there.”
Other leaders have said that raising the cigarette tax places an undue burden on low-income adults who smoke.
However, research has repeatedly shown that this population actually benefits the most from cigarette taxes, quitting smoking at higher rates than other populations of smokers, Chaloupka said. Additionally, people with mental illnesses, who have higher smoking rates than the general population, also quit at higher rates when a cigarette tax is passed, he said.
One barrier to House Bill 1841 has been concern among lawmakers that the public won’t support raising a tax.
Chaloupka said research shows that although the public doesn’t generally like taxes, there’s more support for tobacco taxes, regardless of party affiliation.
Even smokers will support tobacco taxes when they see the money going to help people quit. Most wish they never started smoking, he said.
“Most smokers are trying to quit every year,” Chaloupka said. “If they feel that the revenues are being used to help people to quit and to keep kids from becoming addicted, they’re going to be much more supportive of those tax increases.”