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C TOBACCO ISSUES IN CALIFORNIA C A Report of the California Task Force on Tobacco Issues Prepared for the Tobacco Institute March, 1983

I. INTRODUCTION At the request of the Tobacco Institute, a special task force has been created to evaluate several issues facing the industry in California, and to recommend programs to respond to these issues. Participating in this Task Force were Robert Nelson, Vigo Nielsen, Eileen E. Padberg, and Stuart Spencer. The Task Force was asked to evaluate six key issues. Two of these appear to carry the most serious implications: -- Fire Safety for Cigarettes and Little Cigars. This presents a serious and immediate threat. Laws similar to the New York proposal could virtually outlaw cigarette sales until (and unless) industry can actually develop a non-toxic self extinguishing cigarette. Disclosure of Chemical Substances in Cigarettes. This issue appears to be the single most important, with the greatest long-term public perception implications to the tobacco industry.

The other four issues are: Cigarette Excise Taxes. History shows a continuing and insatiable appetite by legislators for extra revenue at the expense of cigarette smokers, with possible impact on product sales. Public Smoking Restrictions. Again, a hazard, but the industry and its allies have a reasonable track record of slowing the onrush of such restrictions and their advocates. Workplace Smoking Restrictions. The industry must work to refute claims that smoking in the workplace reduces productivity and increases costs. Sampling. The*legal implications require a careful, prudent course on the part of the Tobacco Institute. Otherwise, there are serious dangers to a key component of tobacco marketing programs. II. SDMMARY OF STRATEGIC ANALYSIS The tobacco industry's most crucial problems are not in the narrow, legalistic arena of legislative politics but in the larger arena of public opinion and perception. More than 60 percent of the public is comprised of non-smokers.' Many lawmakers, opinion leaders and interest group spokespersons are increasingly hostile to the industry. At the same time, industry arguments tend to focus primarily on negative impacts on the tobacco industry. They would be stronger and more compelling if they concentrated instead on negative consumer and public impacts. The task force believes the industry has a serious credibility problem today. As long as that credibility problem exists, the industry will probably have a hard time making people believe its position when it's right. The industry should examine its programs to determine if they are eroding credibility--or whether they are moving towards increasing credibility.

, J C C The tobacco industry should examine whether it might find some areas where it can concede some territory, thereby reducing the emotion and noise levels, and have more rational discussions. The Task Force believes a primary thrust of industry communications in the 1980s should be to make the public perceive that the tobacco industry understands there are some serious public issues that is shares responsibility for addressing. In a way, TI may need to think in terms of making a public statement that it is "turning a new leaf." Without taking blame for anything in the past, let it be known that the industry is now moving ahead to deal with a number of issues it recognize are important. This should not be a program of self-incrimination or recrimination; rather, a positive force in future communications. Since several different issues are, simultaneously, presenting challenges to the tobacco industry in the early 1980s, the time has come for the tobacco industry to re-evaluate its public affairs strategies and re-focus its overall approach to public issues. The detailed analyses and programs that follow are meant to be: -- simpler and less legalistic; -- geared to public prejudices and attitudes, rather than industry's self-serving concerns; -- designed to restore and strengthen tobacco industry credibility; -- buttressed by independent evidence and sources. Specifically, the Tobacco Institute should seek to develop stronger, independent allies within the Federal bureaucracy and among elected officials who are willing to favorably address key tobacco industry-related issues. In order for these spokespersons to maintain the highest degree of credibility, they must be perceived as independent persons without any special, personal or financial interest in the tobacco industry.

III. EXCISE TAXES I What Are We Pushing Against? • The Revenue Gap Crisis. California, most other states, and the Federal government are strapped for funds. Cigarette taxes appear to be an easy way to help fill part of the void because they can be collected from manufacturers quickly and easily. They impact only about 30 percent of adults and are hidden within the cost of the product. • A Vengeful Attitude. Some persons and groups seek to punish the tobacco industry for marketing an allegedly evil product. They perceive higher excise taxes as a way of getting even with the industry. • Reformist Enthusiasm. Some persons and groups believe smoking is bad for the health or the soul and think that increased taxes will discourage consumption. What Are Our Best Arguments? f vb / _616it/ v Ze71s ( -Y e If I r ) ~~ ) ~ . -- / , - `~ ~ ~ ~ I 4_ / 11VV J ~ ~ / v.~ q q s~ F ~ ~v ~ ~ ; 4 S,_ oA, E~ vU,7eK o '~< , (!!~_ 7 0 • Such Taxes Punish the Poor. These regressive taxes are unfairly applied against those who can least afford them; the well-to-do escape a major financial burden. • Bootlegging and Organized Crime. Higher taxes will produce bootlegging, lawbreaking by ordinary good citizens, and the danger of spreading organized crime. • Such Taxes Are A Bad Deal for Consumers. Excise taxes cause higher profit margins for wholesalers and retailers. Therefore, these taxes are unfair to the consuming public due to inherent price markups associated with excise tax increases. Consumers pay a very high price for a low net yield to state government. O w What Should Be Our Excise Tax Program? ~ • Band Together With Allies. The full recital of arguments C!~ ~ against excise taxes would be most effective if voiced in concert with allies. The present Tobacco Institute ~ position considers cigarette excise taxes in isolation. I Californ' 11" c i b t h' i d t h r h n ia, a ian e s e s a c eve oug a vigorous public education organization such as the ~ l e_-- ~

C proposed Consumer Tax Alliance. This alliance of business leaders and California consumers will work to fight excise taxes on all fronts, gathering data about excise tax abuses and affects, and providing this information to legislators, the news media, community and taxpayer organizations and other opinion leaders. Additionally, CTA should make a thorough search of the public record for credible links between higher excise taxes and cigarette bootlegging/organized crime. The TI position would be buttressed and expanded with law enforcement, strong newspaper articles and editorials, TV reports, etc. Credible criminologist consultants should prepare footnoted analyses. Prove Higher Taxes Yield Lower Revenue. Current TI data on this linkage is neither credible nor detailed enough. It should be proven, beyond a shadow of a doubt, that reduced tax yields result from increased excise taxes and not other factors, such as reduced cigarette consumption. If definitive proof is not available, this argument should be eliminated entirely because, even though it may be true, it is not believable. All available supporting data must be gathered and subjected to independent economic analysis by a reputable consultant/economist. Then the findings should'be disseminated to key target groups, including legislators, public opinion leaders, news media, allies, etc. • Tell Consumers What Excise Taxes Cost Them. The majority of smokers are not aware in detail of just how much~they pay in federal, state and local excise taxes. Detailed'study of the options for presenting this information in simple, rational terms is need'ed now. A creative program might use one or more of the following approaches: Point of Sale materials which say something like: "40 percent of the price of this pack is government excise taxation on tobacco. Don't you think that's enough?" Carton inserts which show a "pie" diagram tailored to a mock cigarette package, with percentages.

C IV. SELF-EXTINGUISHING CIGARETTES What Are We Pushing Against? • Public Fear of Cigarette-Caused Deaths and Injuries. A reputed 1,800 persons die each year in America from home fires caused by cigarette-induced combustion of home furniture. Five thousand more are injured in such fires. Such statistics are part of the public's conventional wisdom. • Belief in the Myth of Practical Self-Extinguishing Cigarettes. Persons are being told that a self-extinguishing cigarette is practicable, that in fact some are already on!the market (e.g., Shermans). Industry allegedly has the know-how to develop additional brands now. • Belief in the Myth of Burn-Inducing Chemical Additives. Persons are being told that chemical additives cause cigarettes to continue to burn, that without these present chemicals, cigarettes would self-extinguish without new chemical additives. • Belief in the Myth that the Tobacco Industry is Callous About the Danger. Many people believe the tobacco industry is indifferent to the fire hazards mentioned above. Some people may actually believe tobacco companies are stifling innovation to make more money. (This is a relative of the old myth that oil companies are keeping 200-mile-a-gallon carburetors or gasoline additives off the market.) What Are Our Best Arguments? • The Tobacco Industry Cares. The Tobacco Institute is working aggressively and effectively to resolve the problem by improving fire retardants in home furnishings, and by sponsoring other programs on fire safety. • Self-Extinguishing Products Pose a Danger to Smokers. The "self-extinguishing" products now on the market apparently contain much greater levels of tar, and are thus more hazardous to consumer health. To move to increased tar levels could negate what the tobacco industry has done to encourage the public to select low-tar cigarettes.

C • The Cure Would Be Worse Than the Problem. The only way to ensure that a cigarette would be self-extinguishing might be to add chemicals that could have a toxic effect on smokers. What Should Be Our Fire-Safety Program? • Discount Coupon on Smoke Detectors. The tobacco industry might wisely focus its fire-prevention efforts on a simple, proactive program to bring smoke detectors to the public at bargain price. This program actively promotes the installation of fire alarms and smoke detectors. The method: -- Enclose $5-off on smoke detector coupons in each cigarette package or carton. The Tobacco Institute, or individual companies, might seek a cooperative marketing project here with smoke detector companies. Benefits of the program would include: The industry is concerned about the possibility of persons dying in cigarette smoke-related fires. The industry is willing to put its money where its mouth is on the fire safety issue (although the only actual cost to the industry would be for advertising; the discounts would be absorbed by the fire detector supplier/s). The program would reach those individuals perceived to create the hazard: careless cigarette smokers. Heavy media coverage of the above program would be prepared, including: -- News coverage, including radio and TV news coverage. -- Paid advertising by TI (print) and/or individual company advertising. -- The possibility exists for PSAs (Public Service Announcements).

~os~ -l, C • Grant Assistance to the National Fire Protection Agency or Other Credible Groups. TI should consider major specific grants to these organizations to enable funding of new, innovative programs of fire codes and statistical research. TI grants assisting specific new programs to get under way will reap far more publicity than token add-on grants for existing programs. • Increase Funding for Fire Retardant Research. If the opinion offered by Stuart Statler of the Consumer Product Safety Commission is any indication, cigarette makers are perceived to "...stand conspicuously aloof from efforts to deal with the problem. Only the bedding and furniture industries have demonstrated concern." The TI's increase of contribution to research from $10,000 to $75,000 is perceived as going from one drop in the bucket to two. For major impact on public opinion; -- The tobacco industry might prudently make a major increase in its funding of research and development. -- Maximum positive publicity would result if the funding goes for new and needed specific research programs not now funded at all. • Focus and Beef Up Local Fire Safety Programs. TI reports we received suggest an ill-defined focus and dispersal of efforts in present local fire safety programs. This could be overcome if the Tobacco Institute: consolidates its dispersed programs into a handful of clear, simple, easily grasped local programs; brought to bear maximum publicity efforts on these few, possibly taking tobacco industry-funded programs proudly and aggressively into public schools, and making sure the industry takes full credit publicly for what it is doing in this important area; concentrated and substantially increased funding. ~ • Pillow Cards. In an effort to show concern about persons dying in smoking-related fires, the TI should consider placing pillow cards in hotels and motel bedrooms--much like the placement of Gideon Bibles. ! )

A V s 1)4sl 6, The card would siinply say something like: Smoking in bed is a major cause of fire deaths in America. The Tobacco Industry is concerned about your safety. Please do not smoke inbed. The Tobacco Institute • Fund New Programs Aimed at the Elderly and the Poor. Industry fire safety programs might best be targeted specifically on the elderly and the poor, two groups with the highest incidence of fire danger, and the best opportunities for positive goodwill and publicity for the industry. The two most obvious are: -- Funding of fire safety education. -- Major funding of a selected fire detector program. (50 to 100 percent subsidy funding, instead of the partial $5-off coupon program1proposed earlier.) Note: The aim~of these six programs is to plow new ground and establish programs which earn the TI full public credit. Present TI fire prevention programs appear to give minor assistance to other organizations which earn the lion's share-or all of the credit. V. PUBLIC SMOKING RESTRICTIONS The tobacco industry has had great experience and success in dealing with this issue. Thus far, smoking restriction campaigns have developed a predictable course, with similar themes and arguments always carrying the day. But, it is important that the industry not automatically jump in to fight a smoking restriction ordinance or initiative every time one comes up. There may be times when the best thing to do is nothing; to sit by and monitor the situation. In the case of the Los Alamos, New Mexico ballot measure, sitting it out may have actually increased~chances of victory; and this course certainly saved a lot of money. -9-