New Report Fosters Controversy Over Cigarette Taxes
> 8/31/2007 10:28:45 AM

A new report set to appear in the American Journal of Public Health may further intensify scrutiny of planned legislation that would make changes to the State Children's Health Insurance Program (SCHIP). The program was started in 1997 to help the "working-poor," or those with household incomes roughly twice the poverty limit (about $41,000 for a family of 4), by providing health insurance help for children. After showing initial success, the program has been expanded in some states to include families whose incomes are as high as 300% above the poverty line. Political controversy has flared recently as Democrats in Congress moved forward before their summer recess with plans to expand the SCHIP program to help cover more of the roughly 8 million uninsured children in the U.S.

Congress has acted on a $35 billion increase in the program, which is much larger than President Bush's proposed $5 billion increase. To cover these expansions, bills in both the House and the Senate would levy new taxes to cigarette sales nationwide. Previous research covered in this space earlier this month found that increases in the price of cigarettes over time have led to discernible drops in cigarette sales. This should be obvious for any first year economics student: as prices go up, demand goes down. Research from the American Journal of Public Health draws this equation into debate though, by illustrating what researchers say is the disproportionate burden of this new cigarette tax that will be borne by low-income earners.

This new research, led by Dr. Peter Franks of UC-Davis, demonstrated that since the Tobacco Master Settlement Agreement, cigarette prices have had little effect on the number of smokers. The team's conclusions have not passed without comment, and indeed many prominent scientists and policy makers have found major flaws with the team's work. ABC News spoke to many different parties on this end and received a number of answers that broke down the study's usefulness:

"The author's failure to take into account the price promotion dollars spent by the tobacco industry and alternative low or untaxed cigarette options is a major weakness," said Andrew Hyland, associate member of the Department of Health Behavior at Roswell Park Cancer Institute. "The only conclusion that I can come to from this paper is exactly opposite of the authors that price has a huge effect and the industry has brilliantly exploited the MSA to minimize the effect of higher prices on smokers."

[David Lee, an associate professor in the Department of Epidemiology and Public Health at the University of Miami Miller School of Medicine] agreed. "The tobacco industry has responded to the MSA by increasing point of sale marketing and price promotions such as two packs for the price of one," he said. "Industry-reported cigarette cost data has become an increasingly less accurate measure of what smokers are actually paying for cigarettes once price promotions are considered."

The over-arching sentiment from many in the smoking cessation community is that, if anything, the MSA empowered tobacco companies by establishing clear boundaries and rules that they could immediately work on subverting and undermining. That agreement squared things between both state and federal governments and the tobacco industry, but has largely had a negative impact on individual smokers. Along with price increases, other factors have led to a general downturn in overall cigarette sales, but not through any lack of effort of tobacco companies.

Dr. Franks has put forth some interesting food for thought in the continuing dialogue regarding cigarette taxation, but even with this added information, it is difficult to craft an argument around the idea of denying health insurance to children. Taxation may not be the ideal method of reducing tobacco usage, but it is difficult to say at this time that any one measure will be any more successful. This research also wades into political waters where questions of truth sometimes fall by the wayside. As ABC News points out, the one area that all researchers seemed to agree on was that state and federal agencies would do well to increase spending on anti-smoking policies and initiatives. Clearly, further investigation will be necessary to elucidate the policy path best travelled in the coming years.

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