COLLEGE STATION — Cigarette consumption could drop as much as 30 percent in the United States if a $1.25 per-pack tax increase is adopted as Congress has proposed, a Texas Agricultural Experiment Station researcher estimates.
“I don’t think there’s anything to mitigate the impact of such a large price increase,” said Dr. Thomas Blaine, a consumer economist with the Texas A&M University department of recreation, park and tourism sciences.
Blaine, a specialist in leisure-related consumer spending and expert in domestic cigarette consumption, bases his estimate on studies showing that for every 1 percent increase in price, there is a half-percent decrease in consumption.
A 10 percent increase in price, for instance, would result in a 5 percent decrease in consumption, Blaine said.
After President Bill Clinton proposed an additional 75-cent per-pack tax on cigarettes, Congress increased the proposal to an additional $1.25 a pack. Either way, the tax would have a significant impact on consumption, according to Blaine.
Cigarettes are currently taxed at 24 cents a pack.
The tax increase was proposed by the House Subcommittee on Health as a means of paying for changes in national health care proposed in House Bill 3600. The bill should be considered by the House Ways and Means Committee in June, a committee spokeswoman said.
Any tax increase on cigarettes would probably be passed on to the consumer, because manufacturers already had cut prices by some 40 cents a pack in the fall of 1993, Blaine said. His current estimates are based on a per-pack cost of $1.80.
A 75-cent tax hike would mean a price increase of approximately 42 percent, likely resulting in a consumption decrease of 21 percent, he said.
A $1.25 tax increase would cause prices to surge approximately 69 percent, with consumption likely falling almost 35 percent.
Blaine had earlier done studies predicting a consumption decrease to 106 packs per year, or 2,120 cigarettes, per capita among all adults by the year 2000. That’s down from current figures of 2,550 cigarettes a year, or 144 packs, for each U.S. adult.
Approximately 25 percent of the adult U.S. population smokes. That makes the average per capita consumption among smokers some 466 packs per year, or about one and one-fourth packs per day. Cigarettes come 20 to a pack.
Blaine’s earlier studies were based on assumptions that prices would increase only by some 4 percent per year, equal to the expected annual inflation rate, while real income would increase 2 percent a year.
He had said per-capita consumption was steadily declining at just under 3 percent a year, primarily because of health concerns. Income growth and an aging population were expected to increase consumption, but not enough to offset larger losses caused by health concerns.
If the proposed tax passes, however, those projections could go up in smoke. Smokers likely would begin cutting back as soon as the higher tax is assessed, Blaine said.
Consumption could immediately fall to a pack a day among smokers with a 75-cent increase and to 16.5 cigarettes a day if the $1.25 raise is adopted.
Last fall’s substantial price decrease may have impacted consumption, but it’s too early to tell because federal government figures on cigarette use won’t be available until mid-summer, Blaine added.
“In general, however, we’re still trending down about 4 packs per year per adult, or a little less than 3 percent,” he said. “The health concerns will continue to be the major factor in that steady reduction.
“But with this tax, the government could do in one fell swoop what the health trend would take 10 or 15 years to do. If some people are hoping we get to a smokeless society, this tax may just help do it.”
Blaine cautioned that one consequence of a tax hike might be some increased risk from substances in the cigarettes.
“While consumers purchase fewer cigarettes when prices rise, there is substantial reason to believe they will also smoke each cigarette to a lower point, where tar and nicotine are in the highest concentration,” he explained.
“This may be the most compelling argument against using taxes to reduce smoking.”
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