USA TODAY Article on 2009 Federal Tobacco Tax Increase!

Tax hike cuts tobacco consumption

By Dennis Cauchon, USA TODAY

September 10, 2012

A giant federal tobacco tax hike has spurred a historic drop in smoking, especially among teens, poor people and those dependent on government health insurance, a USA TODAY analysis finds.

President Obama signed the tax hike — the biggest to take effect in his first term — on his 16th day in office, reversing two vetoes by President Bush. The federal cigarette tax jumped from 39 cents to $1.01 per pack on April 1, 2009, to finance expanded health care for children. Since then, the change has brought in more than $30 billion in new revenue, tax records show.

Yet the tax hike and its repercussions remain mostly unknown to the non-smoking public. The tax increase's size and national reach lifted prices 22% overnight, more than all state and local tax hikes combined over the past decade when adjusted for inflation.

Result: The tax hike has helped restart a long-term decline in smoking that had stalled in recent years. About 3 million fewer people smoked last year than in 2009, despite a larger population, according to surveys by the Centers for Disease Control and Prevention.

The tax hits hardest on families who make less than $50,000 a year and account for two-thirds of smokers.

"The federal tax increase was the win-win that we thought it would be and the evidence shows that," says Danny McGoldrick, research vice president at the Campaign for Tobacco-Free Kids.

Teen smoking immediately fell 10% to 13% when the tax hike took effect, says researcher Jidong Huang of the University of Chicago at Illinois. "High prices deter kids from picking up cigarettes," he says.

Higher taxes aren't the only reason smoking has fallen dramatically among adults since the early 1980s and among teens since the mid-1990s.

Health concerns, smoke-free buildings and marketing restrictions have played a role. Tobacco companies have raised their prices, too, making money off fewer customers.

"It's difficult to be specific about what influences individual adult consumer behavior, but taxes are one thing in the mix," says David Sutton, spokesman for Altria Group, maker of Marlboro cigarettes. He says taxes and fees are so high — 55% of Marlboro's retail price — that they unfairly burden adults who choose to smoke.

Taxes are the sledge hammer of anti-smoking efforts. The federal tax hike helped push tobacco use down to 18.9% in 2011, the lowest level on record, according to the CDC surveys. Even smokers who don't quit light up less. In the 1990s, one of every 20 high school students smoked 10 or more cigarettes a day. Today, one out of 71 students smoke that much.

Other findings:

•Who quit. The elderly and Hispanics slashed smoking most dramatically, each down more than 15% from 2008 to 2011, according to the CDC's National Health Interview Survey. Women quit more than men. Least moved: middle-age men, down just 1.2%.

•Health care for poor. About 1 million adults on Medicaid quit smoking, which could reduce future health costs.

•Tobacco industry. Consumer spending on tobacco rose from $80 billion in 2008 to $98 billion in 2011 in inflation-adjusted dollars — even though the amount of tobacco purchased fell 11% , Bureau of Economic Analysis data show. Higher taxes accounted for about half that spending increase. The rest went to tobacco companies and retailers.