Raising cigarette prices is one of the most effective ways to prevent and reduce smoking, especially among youth. Research shows that every 10 percent increase in the real price of cigarettes reduces overall cigarette consumption by approximately three to five percent and the number of youth who smoke by six or seven percent.
New York City has the highest state-local tax on cigarettes in the country. Youth smoking in our city declined from 17.6% in 2001 to 8.5% in 2007. But it has remained level since then. More work needs to be done to bring down youth smoking rates and prevent kids from lighting up.
The recent proposal by Mayor Bloomberg and the City Council will increase prices on tobacco products in an effort to reduce youth smoking. A set of “Sensible Tobacco Enforcement and Pricing” (STEP) initiatives would work to stop trafficking of illegal untaxed cigarettes, restrict the use of the coupons and price discounts, and create a price floor for a pack of cigarettes.
The Department of Finance and the Sheriff’s office have been vigilant in their efforts to stop counterfeiting and the illegal trafficking of untaxed cigarettes. A growing body of evidence supports the connection between cigarette trafficking and organized crime because it provides large profits with lower risks than other criminal activities such as drug dealing.
Other states are not as rigorous in their pricing and tax strategies as New York State. Near New York, Virginia is a low-taxed state. North and South Carolina don’t require a tax stamp on cigarettes. Stores that sell cigarettes ondo not charge sales tax because they are not subject to US federal or state taxes.
Some NYC retail stores buy cigarettes illegally and avoid paying our state-local taxes. For instance, retail stores can buy contraband cigarettes from Virginia for about $5, and sell them for $7-$9/pack, making almost five times as much profit as they would off legally taxed cigarettes, while still offering lower prices. The retailers who play by the rules are losing money and can’t compete.
In the past, the penalties have not been severe, but the proposed legislation would increase fines and level the playing field for New York’s law-abiding retailers.
Coupons are another way the tobacco industry keeps their prices down to further prompt impulse purchases. Big Tobacco spends almost $7 billion a year of their $8 billion marketing budgets on discounts, and they target areas such as NYC that have high taxes. The new proposed legislation would prohibit retailers from redeeming coupons, offering multi-pack discounts, or selling cheap tobacco products, and it would create a price floor for a pack of cigarettes and little cigars.
For every tobacco-related death, two new young people under the age of 26 become regular smokers. Approximately 3 out of 4 high school smokers continue to smoke well into adulthood. In NYC, 20,000 public high school students currently smoke cigarettes, one-third of whom will die prematurely as a direct result of smoking. Tobacco companies spend one million dollars every day marketing their deadly products in New York.
These proposed initiatives are innovative and bold next steps in tobacco control that we’ve come to expect from our city. They will not only reduce youth access to tobacco products, but will also help honest retailers compete.