Smoke break gets more expensive with tax boost

(Agencies)
Updated: 2009-03-30 14:13

The tax increase is only the first move in a recharged anti-smoking campaign. Congress also is considering legislation to empower the Food and Drug Administration to regulate tobacco. That could lead to reformulated cigarettes. Obama, who has agonized over his own cigarette habit, said he would sign such a bill.

Prospects for reducing the harm from smoking are better than they have been in years, said Dr. Timothy Gardner, president of the American Heart Association. The tax increase "is a terrific public health move by the federal government," he said. "Every time that the tax on tobacco goes up, the use of cigarettes goes down."

About one in five adults in the United States smokes cigarettes. That's a gradually dwindling share, though it isn't shrinking fast enough for public health advocates.

The Centers for Disease Control and Prevention says cigarette smoking results in an estimated 443,000 premature deaths each year, and costs the economy $193 billion in health care expenses and lost time from work. Smoking is a major contributor to heart disease, cancer and lung disease.

Public health officials are urging individual doctors and staff at telephone "quit lines" in every state to make the most of the tax increase by reaching out to smokers. But it's unclear how deeply the tax will cut into tobacco consumption.

Eric Lindblom, research director for the Campaign for Tobacco-Free Kids, says he expects a drop of at least 6 percent to 7 percent among young smokers.

Philip Gorham, who tracks the tobacco business for Morningstar, the investment research firm, said he expects an overall drop of 4 percent to 5 percent this year. What happens after that is less certain, especially as the economy recovers.

"I would expect a road bump this year," said Gorham. "But these companies will still be extremely profitable. I still think they will make their return on capital by wide margins in the long run."

Philip Morris USA, the largest tobacco company and maker of Marlboro, is forecasting a drop, but spokesman Bill Phelps said he cannot predict how big. Philip Morris raised Marlboro prices by 71 cents a pack early this month, and prices on smaller brands by 81 cents a pack. Other major companies followed suit.

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