Tobacco Documents Online

J RICHARD BURR S~n~ D~. No~rn~ CA~OtJ~, COMMERCE HEALTH AND THE ENVIRONMENT ENERGY AND POWER OVERSIGHT AND INVESTIGA~ONS angrt nittb ~la~l~ington, ~ 2051.5-3305 1513 Lo~m,~oecrH HOB W, CSH~GTON. OC 2~15 FAX (202) ~5 (~2} ~20 E.MAIL: Richa rd.Bu ~N C05@mail.h ouse.go~ ~ WEST Fm~ Su=~ 50B PIEDMONT P~ TWO W~S~QN-SALEM, NC 27 (336l ~1~125 F~X (336) 725~3 FOR IMMEDIATE RELEASE May 14, 1998 CONTACT: Alicia Peterson (202) 225-2071 REPRESENTATIVE RICHARD BURR RELEASES GAO STUDY ON THE ECONOMIC IMPACT OF TOBACCO LEGISLATION BURR: Hiking cigarette taxes will promote black market activity and fail to substantially reduce youth smoking. WASHINGTON, DC--Today Represemative Richard Burr (NC-5) released a study by the General Accounting Office (GAO) of the economic impact of tobacco legislation. On June 19, 1997 Rep. Burr requested that the GAO conduct the study. The report rifled, "Tobacco: Issues Surrounding a National Tobacco Settlement," addresses questions surrounding youth smoking, the black market sale of cigarettes, state excise taxes on cigarettes and tobacco-related employment figures. "The GAO study illustrates that by increasing the price of cigarettes, we put America in danger of a flourishing black market for cigarettes, we miss the mark of reducing youth access to cigarettes, and we force states into a precarious situation of raising billions of dollars in probable lost revenue from excise taxes," said Representative Burr. "As we've seen in Canada, access to cheap contraband tobacco undermined the government's health policy objectives of reducing tobacco consumption, particularly among youth. You earmot control the distribution and sale of cigarettes to youth if those cigarettes are obtained on the black market," Burr continued. The report concludes that any price disparity of cigarettes between states or countries provides the economic incentives for individuals to profit from smuggling, therefore encouraging black market activity. Studies show that sharp increases in Canadian cigarette taxes increased black market organized crime between the U.S. and Canada. The Canadian government estimated that in 1993, contraband cigarettes made up over 60% of the Quebec market alone. "A thriving black market for cigarettes does not exist in a vacuum. According to the Canadian government, international smuggling brought with it an increase in violence, suffering for Canadian merchants and a loss of 2 billion Canadian dollars in tax revenue in one year alone. We can't ignore the Canadian example as American legislators work toward responsible tobacco legislation to reduce underage smoking," Burr stated. The extent ofU.S.-Mexican intemarional cigarette smuggling is currently unknown, but according to government officials substantial smuggling exists. TI30722999

PAGE 2 "Additionally, regarding youth smoking, the GAO report illustrates that the debate in Congress and the White House is on the wrong track. Is our goal to reduce youth smoking, or to punish the tobacco industry? l_fmy colleagues in Congress share the American goal of keeping cigarettes out of the hands of our children, then we need to make sure that any tobacco legislation does not substitute extracting money from the tobacco industry for the true purpose of controlling youth access," he continued. The report shows that increasing the price of cigarettes by $0.62 per pack will reduce all consumption from 9-16%, increasing each pack by $1.50 will reduce consumption from 19-33%, and inereas_'mg each pack by $2.00 will reduce consumption from 24-40%. From these figures, even the best ease scenario would not bring a reduction in teen smoking by the 60% mandated in a current legislative proposal in Congress. Studies show that if th6 price of cigarettes increased by 100%, youth consumption still would not fall by 60%. Decreasing underage cigarette use by this amount is not attainable through the suggested tax. increases. The cost of the inevitable • penalties levied on the industry for missing these marks would be transferred to smokers. Further, according to the Tax Foundation, almost 60% of the cigarette excise tax burden falls on people earning $30,000 or less annually. "Finally, any decline in cigarette consumption will force states to make up potentially billions in state excise tax revenue," Burr continued. Nationwide, the cigarette tax hike could end up costing the states from about $673 million to $3 billion annually in lost income. T!30723000