Cigarette Excise Taxes Protect the Public's Health and Improve North Carolina's Economy: A Policy Analysis
Creators: name: Cox, Sarah E.
Publisher: name: The University of North Carolina at Chapel Hill University Libraries
Year: 2003

description: Tobacco use is the number one cause of preventable death and disease in the United States and in North Carolina. The carcinogenic composition and addictive nature of tobacco products make tobacco use a difficult public health problem to address. In North Carolina, cigarette smoking is responsible for thousands of deaths and billions of dollars in health care costs each year. Smoking is not only harmful to the smoker, but also to persons exposed to secondhand smoke and to unborn fetuses whose mother's smoke while pregnant. Despite the negative effects of smoking in North Carolina, the agricultural sector still perceives the tobacco crop to be of considerable importance to North Carolina's economy. Furthermore many North Carolinians perceive tobacco farming to be a primary contributor to the overall welfare of the state. Therefore, measures that reduce tobacco consumption are often deemed unacceptable by lawmakers in the state. However, evidence shows that reducing tobacco consumption in North Carolina is neither the primary nor a major cause of declines in demand for North Carolina grown tobacco. In order to effectively reduce tobacco consumption, and specifically smoking rates, lawmakers must be presented with a policy option that would protect the public's health while simultaneously providing assistance to tobacco farmers - regardless ofthe cause of declining demand for North Carolina grown tobacco. A substantial cigarette excise tax increase would significantly decrease cigarette consumption in North Carolina and the resulting new state tax revenues could be spent on initiatives to help tobacco farmers who are already facing declining demand for their crop. Since 1995, the U.S. has seen a number of cigarette excise tax increases as the health community gains evidence that this policy intervention is the most effective way to reduce smoking rates. Research indicates that for every 10% increase in the cigarette excise tax there is a 4%-5% decline in consumption, demonstrating the inelasticity of demand for cigarettes ("Raising Cigarette Taxes," 2002). Regardless of this relatively small decline in consumption, price increases appear to be the most cost-effective and feasible means for addressing the tobacco use problem in the U.S. Excise tax increases, coupled with health behavior interventions such as media campaigns, education and health services have resulted in a consumption decline of approximately 3% nationally since 1995 ("Raising Cigarette Taxes," 2002). However, demand for U.S. grown tobacco has declined by almost 32% during the same time period. In states where a number of communities are dependent on tobacco as a cash crop, this decline has had a significant effect on the economy (Gale, Foreman, & Capehart, 2000). In NC, where tobacco is the fourth leading cash crop (NC Dept. of Agriculture, 2003), farmers struggle to maintain their income level and oppose measures that contribute to declines in demand for their crop. Despite a number of government sanctioned reports in the early 1990s, however, it has become clear that public health interventions, and indeed cigarette excise tax increases, are not the major cause of declining demand for domestically grown tobacco (Foreman, 2003). More recent evidence indicates that American tobacco manufacturing companies have significantly increased their purchase of foreign-grown tobacco since the mid-1990s while steadily decreasing the amount they purchase from U.S. farmers (Gale et.al., 2000). Clearly, a number of factors have influenced this trend, and this analysis will attempt to make clear why the tobacco industry has changed its purchasing behavior. Specifically, this analysis will attempt to pinpoint the factors that have reduced demand for North Carolina grown tobacco and to demonstrate the degree to which a revenue-raising cigarette excise tax could provide assistance to the state's struggling tobacco farmer and overall relief to the state's economic crisis.