Cigarette tax a hot ticket for state as few quit

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Cigarette tax a hot ticket for state as few quit
By GARY SCHARRER

AUSTIN — The hefty $1-a-pack tax increase on cigarettes has produced
$244 million more in revenue for the state than experts projected last
year.

Consumption did not drop as dramatically as expected. But anti-smoking
groups say they are not disappointed because 261 million fewer packs
have been sold since Texas lawmakers raised the cigarette tax from 41
cents to $1.41 per pack.

The higher tax took effect on Jan. 1, 2007. Lawmakers didn't raise
taxes on cigars, but they did approve a modest increase on other
tobacco products, including pipe and chewing tobacco.

"Obviously, we would love to see those (consumption) numbers go down
even more. But what's important is that we know what it takes to
continue to drive those numbers down — a fully funded anti-tobacco
program," said James Gray, spokesman for the American Cancer Society in
Texas.

The Campaign for Tobacco Free Kids projected that a cigarette tax
increase would result in 339 million fewer packs of cigarettes sold in
Texas, a projection that was off by about 78 million packs.

Budget experts had expected the higher cigarette tax to produce $1.004
billion for the 2007 fiscal year that ended on Sept 1. Instead, the
state hauled in $1.248 billion in the fiscal year, which included only
eight months of the higher tobacco tax.

And if December sales keep track with the monthly average, the total
tax revenue for the first year of the higher tax will be about $1.46
billion — or roughly 1.034 billion packs of cigarettes, based on
cigarette stamp sales. Each pack carries one tax stamp.

"With any tax increase, you expect a drop in taxable consumption, and
the drop was less than what we expected," said R.J. DeSilva, spokesman
for Texas Comptroller Susan Combs. However, the comptroller's office
expects a decline in consumption in the coming months.

Without surveys and data, it's hard to pinpoint reasons why smokers who
faced the tax hike didn't cut their consumption more than they did.
There are an estimated 3 million smokers in Texas, according to Gray.

Perhaps cross-border cigarette sales and smuggling are not as rampant
as critics of the tax increase warned they would be, thus creating more
tax revenue than expected, Gray said.

Or, maybe it's that smokers such as John Sheffield, who wanted to quit
but couldn't, simply cut back but didn't stop.

"I hate it. I don't like the habit. I wish I could quit. I've tried
several different ways, but I'm addicted," said Sheffield, an Austin
resident.

"The (higher) tax hasn't made me quit," he said. "It's made me look for
options — buying online, smoking a pipe, buying bulk tobacco, rolling
my own cigarettes and picking cigarette butts up off the street."

Sheffield, 32, said he has reduced his two-pack-a-day habit to about a
half pack.

Counterfeits, smuggling

A spokesman for a major tobacco company, which opposed the tax
increase, warned that a single year of sales data does not indicate a
trend.

"Whenever you see a large-scale excise tax increase of this size, over
time, the revenue stream becomes very unstable and very volatile,"
Philip Morris USA spokesman David Sutton said. "In many cases, this
results in lots of unintended consequences, such as illicit activity."

People turn to counterfeit or smuggled cigarettes "all designed to
evade paying the taxes, and ultimately this causes a hit on the revenue
stream moving forward," he said.

Of 40 states that raised cigarette taxes between 2002 and 2005, only
eight saw tax revenue meet or exceed projections. The state of New
Jersey actually saw cigarette tax revenue decline last year after a
fourth increase in six years pushed its tax to $2.58 per pack, the
highest in the country.

Despite the increase in expected revenue, experts in the Texas
comptroller's office expect cigarette consumption to start dropping
over the next few months. They are projecting about $340 million less
than what the tax produced in the first 12 months.

Some smokers have not yet changed their habits, said DeSilva, the
comptroller's spokesman.

"We are assuming for fiscal year 2008 and beyond that some of the
people in this group will choose to quit smoking or curtail consumption
as the price of cigarettes continues to remain higher than the
pre-January 2007 levels," he said.

Groups such as the American Cancer Society, the American Heart
Association and the American Lung Association say the $1-per-pack tax
increase is the most significant effort to reduce cigarette smoking
ever undertaken in Texas.

"The message here is the cigarette tax is a solid revenue stream, and
we have stopped smokers from consuming some 260 million packs of
cigarettes," said Gray, of the Cancer Society.

Curbing the need

The various health-related groups plan to pitch anti-smoking and
smoking cessation programs when state legislators return to Austin in
2009. Currently, none of the cigarette tax revenue goes for health care
or anti-smoking programs.

"It makes me sick," said Laura Chapman of the American Lung
Association, referring to the state's lack of funding for anti-smoking
programs. "We are taking this on as an advocacy. With the revenue being
generated (from cigarette taxes), why not? We would be foolish not to.
It has to be a priority."

That is welcome news for smoker Sheffield.

As it stands, the higher cigarette tax is "only a guise for the
government to collect more revenue while standing behind a moral
cause," he said.

All of the revenue from the $1-per-pack increase goes for school
property tax cuts. Lawmakers this year defeated an effort by Sen. Jane
Nelson, R-Lewisville, to require 5 percent of the new tax money to be
used for anti-smoking programs.

An estimated 80 percent of smokers want to quit, Gray said.

Until Texas uses cigarette tax revenue on anti-smoking programs, he
said, state leaders are missing an opportunity to curb the No. 1 cause
of preventable deaths. "Until we do that, this is going to continue to
kill 24,000 Texans every single year," Gray said.

gscharrer@express-news.net

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