Philip Morris
Ellen Merlo Issues Talking Points to PM Usa Trade Council
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draft. 1/11 /94. JGR Ellen Merlo issues
talking points to PM USA Trade Council
The Major Issues
The tobacco industry faces stepped-up
legislative activity on a number of fronts
in 1994 -- including issues s.uch as solid
waste disposal and fire-safe cigarettes.
But the three areas of most concern are:
[Overhead # 1 Excise tax increases,
smoking bans, marketing restrictions. J
excise tax increases
smoking bans
marketing restrictions.
Factors Driving the Issues.
[Overhead #2 EPA report on ETS.
Fiscal Pressure on States. Linkage of
tobacco with health care reform.]
(1) The EPA's January 1993 report
that put environmental tobacco smoke
on the EPA's "Group A" carcinogen list.
(2) Intense fiscal pressure on states
as a result of the recession and the
general "anti-tax" mood of the
electorate. Consumer excise taxes on
cigarettes are a way to raise revenue
fast with little political cost.
(3) Anti-smoking activists trying to
link taxes on cigarettes to health care.
2
3. 3.
STATUS REPORT ON THE THREE
MAJOR ISSUES.
Excise Taxes
[Overhead #3 Map of U.S. with state
tax rates.]
Currently, state excise taxes range from
a low of 2.5 cents a pack in Virginia, to a
high of 60 cents a pack in Hawaii (65
cents in Washington, D.C.) The total tax
bite on a pack of cigarettes (FET, state,
local and sales taxes) averages 31.3
percent of the price and -- in some
places -- exceeds 40 percent of the
price.
[Overhead #4 Map of U.S. with 1994
tax threats shaded. More brightly
shaded states where increases are
governor-driven.J.
Map shows states where we face the
potential for tax increases next year.
There are about 33 states where we
think there's a good chance for an
excise tax increase being proposed.
In the more brightly shaded states the
tax increase proposals are being driven
by the governors of those states. This
means a bill has a great deal of support
already in place and will be particularly
hard to defeat.
[Overhead #5 States with 1994 ballot
initiative threats, and with potential for
ballot initiatives]
Ballot referendums and ballot initiatives
can achieve the same anti-smoker ends
as bills passed in state legislatures.
In Michigan, a ballot initiative is
attempting to top an increase passed by
the legislature. The legislature enacted
a 15-cent increase. If the initiative is
approved in November, the tax will go
up by 50 cents.
In Ore . on a ballot initiative to hike the
state cigarette excise tax by 25-cents
and use the revenue for health care and
anti-tobacco programs has been filed for
the 1994 election.
5 5
I n Colorado and I nd iana, bal lot
i n itiatives to i ncrease taxes are also o n
the fast track.
In Arizona, Montana, and Nebraska
there's a potential for tax increases via
ballot initiatives.
Ballot initiatives and referendums are
particularly hard to defeat, because the
majority of non-smoking voters usually
support the tax increase.
7. 7.
Th e I m pact of Excise Tax I ncreases on
Business
When the tax goes up sharply, industry
loses volume and profits as many
smokers cut back or switch to discount
brands.
Retailers and wholesalers in high-tax
states take an especially hard hit, as
smokers begin buying their cigarettes
over state lines, on Indian reservations
or from sm ugglers to avoid the tax.
At federal level, even a 50 cent-per-
pack increase would lead to the loss of
more than 200,000 jobs in tobacco and
related industries nationwide including
tobacco distributors and retailers.
8.
Smoking Bans - the Second Major
Threat.
[Overhead #6 Excise tax increases,
smoking bans, marketing restrictions.]
If smokers can't smoke on the way to
wo rk, at wo rk, i n sto res, ban ks,
restaurants, malls and other public
places, they are going to smoke less. A
large percentage of them are going to
quit. Overall cigarette purchases will be
reduced and volume decline will
accelerate.
Here are the states where we expect
state-wide smoking bans or severe
restrictions to be introduced in 1994:
8 8
9.
[Overhead #7 Map highlighting states
where bans are expected to be
introduced in 1994]
Additionally, we expect tough smoking
ban or smoking restriction battles at the
local level -- towns, cities and counties --
in these states.
[Overhead #8 Map highlighting states
with localities where we expect ban
battles]
Finally, there are possibilities for
state or local ballot initiatives to ban or
restrict smoking in these states.
[Overhead #9 Map highlighting states
where there is a threat of local or state
ballot].
[Overhead #10 taxes, smoking bans,
MARKETING RESTRICTIONS].
Marketing Restrictions: the third major
th reat
Marketing restrictions can range from
local vending machine bans, to state
restrictions on self-service, all the way
up to Senator Ted Kennedy's regularly
introduced proposal to allow every state
to i m pose its own warn i ng labels and
advertising restrictions.
