National Cancer Institute NCI Cancer Bulletin: A Trusted Source for Cancer Research News
February 10, 2009 • Volume 6 / Number 3

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Health Groups Hail Increase in Federal Tobacco Taxes

On February 4, President Obama signed an expansion of the State Children's Health Insurance Program, which included a federal tax increase on cigarettes, 'little cigars,' and cigarillos. Photo by Win McNamee. On February 4, President Obama signed an expansion of the State Children's Health Insurance Program, which included a federal tax increase on cigarettes, "little cigars," and cigarillos. Photo by Win McNamee.

Taxes on cigarettes, “little cigars,” and cigarillos will increase significantly under legislation signed by President Barack Obama on February 4.

The legislation’s chief focus is the expansion of the State Children’s Health Insurance Program (SCHIP), which provides health insurance coverage for children whose families do not qualify for Medicaid and who do not have insurance through an employer or the resources for private insurance. Funds from the increased tax on tobacco products will be used to offset the cost of the SCHIP expansion.

The last federal excise tax was passed in 1997 and went into effect in two stages—$0.10 in January 2000 and $0.05 in January 2002, raising the tax to a total of $0.39. Under the new law, federal taxes on packs of cigarettes will increase by $0.62, while the tax on little cigars will increase by $1.01 and on cigarillos by $0.35. For little cigars—similar in size to cigarettes, but wrapped in a tobacco leaf—the increase brings their tax in line with cigarette taxes. The tax on cigarillos, which are thinner versions of traditional cigars, was raised from $0.05 to $0.40.

Both the expansion of SCHIP and the tax hike were applauded by numerous medical, health care, and tobacco control organizations, including the American Cancer Society, American Lung Association, American Medical Association, and Campaign for Tobacco-Free Kids (CTFK).

“Increasing the federal tobacco tax to fund SCHIP is a win-win proposal that will help children get the health care they need, while also acting as a deterrent to young smokers and potential smokers,” said American Medical Association President Dr. Nancy Nielsen.

Data show that youth are more responsive to cigarette price increases than adults, with a 10 percent increase in the price of cigarettes estimated to reduce youth smoking by almost 7 percent compared with 2 percent among adults.

“The passage of this legislation means that little cigars and cigarillos will be taxed at the same rate as cigarettes. Increasing the price of these tobacco products will help make them less appealing to youth,” said Dr. Cathy Backinger, chief of NCI’s Tobacco Control Research Branch.

Declines in cigarette smoking among youth have stalled in the past 4 years, Dr. Backinger explained, with 20 percent of youth reporting that they were current smokers in 2007. Data also show that youth are increasing their use of other tobacco products, including little cigars and cigarillos.

On the same day President Obama signed the SCHIP legislation into law, the American Legacy Foundation issued a news release with new findings showing that cigarillo use increased by 240 percent and little cigar use increased by 150 percent between 1997 and 2007.

Young African Americans appear to be the heaviest users of these products. Available evidence suggests that they favor one brand in particular, Black & Milds, often just called “Blacks.” In 2007, the Altria Group, which includes Philip Morris, acquired John Middleton, Inc., which manufactures Black & Milds.

According to the CTFK, the tobacco tax increases will prevent 2 million children from ever starting to smoke, help more than 1 million adult smokers quit, prevent nearly 900,000 smoking-related deaths, and generate more than $44 billion in health care savings over the long term.

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