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50-State Law Approaches to Reducing Cigarette Tax ... · PDF filehigher taxes.1 Taxation not...
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@tobacconomics
50-State Law Approaches to Reducing Cigarette Tax Avoidance
and Taxing OTP’s, 2005-2014
Camille K. Gourdet, J.D., M.A.*, Hillary R. DeLong, J.D., Colin Goodman, Jamie F. Chriqui, Ph.D., M.H.S., Frank J. Chaloupka, Ph.D. Feb 26, 2015
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Presentation Overview
• Research questions • Background to motivate the research • Study methods • Findings from the study • Implications for state and community tobacco control
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Research Questions
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BACKGROUND
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Research Problem
Tax Avoidance and Evasion (Cigarettes): 1) causes states to lose money every year 2) undermines public health objective of deterrence through
higher taxes.1
Taxation not keeping pace with consumption (OTPs): 1) Most OTPs are taxed at far lower rates than cigarettes 2) OTP consumption steadily risen, while cigarette smoking rates declining.2
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[1] Chaloupka, F. J., Straif, K., & Leon, M. E. (2010). Effectiveness of tax and price policies in tobacco control. Tobacco Control.; Chaloupka, F. J., Yurekli, A., & Fong, G. T. (2012). Tobacco taxes as a tobacco control strategy. Tobacco Control, 21(2), 172-180.
[2] (King, Brian A., Shanta R. Dube, and Michael A. Tynan. "Flavored cigar smoking among US adults: findings from the 2009–2010 National Adult Tobacco Survey." Nicotine & Tobacco Research 15.2 (2013): 608-614., page 5)
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Curtailing Tax Evasion through Encrypted Cigarette Stamps
– Stamps are main enforcement mechanism in 48/51 states
– How encrypted stamps help stop tax avoidance • Multiple layers of authentification (i.e. not counterfeit) and
verification (i.e. where came from) • Allow state enforcement to immediately identify counterfeit
stamps
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New Federal Laws: Lower taxes on Pipe + Large Cigars
2009 Tobacco
Control Act 2010
PACT Act 2014 FDA “Deeming
Rule”
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FEDERAL TAX RATES: • Little/small Cigars taxed the same as cigarettes • Chewing Tobacco < Snuff • Pipe < RYOT
Closed tax loophole on online, mail-order sales: • All taxes must be paid • Reporting, delivery requirements on sellers of cigs, (RYOT), smokeless (snus, snuff)
E-cigarettes • Could regulate ingredients, age restrictions, etc. same as cigs
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Percentages of Change in Cigarette, OTP Consumption, 2008-2011
SOURCE: Centers for Disease Control and Prevention (CDC. "Consumption of cigarettes and combustible tobacco--United States, 2000-2011." MMWR. Morbidity and mortality weekly report 61.30 (2012): 565.
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-32.8
75.7
573.1
-86.4
126.3
-200
-100
0
100
200
300
400
500
600
Cigarettes (2000-2011)
Roll-your-Own Pipe Little Cigars Large Cigars
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Loose Tobacco vs. Pipe Tobacco, 2010-2013
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0.0
2.0
4.0
6.0
8.0
10.0
12.0
Q1 2010
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
Q4 2012
Q1 2013
Q2 2013
Q3 2013
Q4 2013
Sale
s Vo
lum
e (in
mill
ions
of o
unce
s)
Smoking Tobacco Sales Total US Market-Combined Convenience and FDM Stores (Nielsen)
Loose Tobacco Pipe Tobacco
SOURCE: Jidong Huang, Frank Chaloupka. “Prices and Sales of Tobacco Products from Commercial Scanner Data: 2010-2013
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Disposable E-cigarette Sales, 2010-2013
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0
2000
4000
6000
8000
10000
12000
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18
Q1 2010
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
Q4 2012
Q1 2013
Q2 2013
Q3 2013
Q4 2013
Sale
s Vo
lum
e (T
hous
ands
of P
iece
s)
Sale
s Pr
ices
(Rea
l 201
3 Q
4 D
olla
rs)
Disposable Electronic Cigarettes Volume and Price (US Market) Nielsen
Real_Price Volume
SOURCE: Jidong Huang, Frank Chaloupka. “Prices and Sales of Tobacco Products from Commercial Scanner Data: 2010-2013
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METHODS
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Methods
• Original legal research (Lexis + Westlaw Next) • Boolean searches of the statutes, regulations, relevant agency opinions and
(where appropriate) case law • All 50 states and Washington, D.C. • Laws in effect: Jan. 1. 2005 – Jan. 1, 2014 • All laws double-coded one year to refine coding protocol • Inclusion criteria (cigs): explicitly states ‘encrypted,’ ‘digital’ stamps • Inclusion criteria (OTPs): definitions • Exclusion criteria: state Constitutions, sales tax laws, enabling laws, online
delivery sales laws, MSA laws • Secondary source verifications: CDC STATE System, NCI SCLD System,
CTFK, NCSL, published articles, state department of revenue/taxation websites, etc.
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Methods: Types of OTPs
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• Cigars • Cigarillos • Little cigars • Pipe • RYOT • Dry snuff • Moist snuff • Snus • Smokeless • Dissolvables • E-cigarettes
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RESULTS
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Cigarette Stamping/ Recordkeeping Results
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Cigarette Stamping/Recordkeeping Laws (as of 1/1/14)
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Encrypted stamps w/ anti-counterfeit technology Distinct stamps for certain tribes (e.g., federally Recognized, compacting, non-compacting)
Recordkeeping requirements in lieu of stamping Distinct stamps (TX) or rates (AR) for border zones
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Encrypted Stamp Laws
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• California • GOAL—stop estimated $280 billion annual losses) • Law 1st eff. Jan. 1, 2005 (30162)
• Massachusetts • GOAL—stop/slow counterfeit stamps, easier authentication process, only MSA-approved cigs stamped • Law 1st eff. July 1, 2011 (64C, 30)
• Michigan • GOAL—fight tax evasion • Law 1st eff. June 20, 2012 (205.425a)
• **New Jersey • Law 1st eff. Oct. 31, 2008 (54:40A-11) • NOT implemented