Price Increases May Not Dull Appetite for Cigarettes 
Smokers say they won't quit. But experts see positive effect if consumers cut back tobacco use.
 

By ALISSA J. RUBIN, Times Staff Writer

WASHINGTON--Growing up in a working-class neighborhood of the Maryland suburbs just outside Washington, Tymiko Jones succumbed to peer pressure and started smoking when she was only 15. Now, seven years later, she smokes half a pack a day of Newports when she is by herself and as much as three packs if she is out with friends.
     Trained as a physical therapist but able to find only part-time work, she spends nearly $1,000 a year on cigarettes--a substantial share of her sub-$20,000 income. If Congress approves the anti-smoking legislation pending in the Senate, which would raise the price of cigarettes by $1.10 over five years, her habit would drain at least $500 more from her wallet each year.
     Like Jones, most of America's smokers fall toward the bottom of the income scale and can least afford the increase. But will the price hike persuade Jones and others like her to quit, as Congress hopes?
     "Even if the price goes up I'll keep on smoking," Jones said. "It keeps me calm."
     As Jones' answer illustrates, Congress may be disappointed if it thinks it can turn many people off smoking by increasing the price. Even sharply higher prices probably cannot stop many heavily addicted smokers from lighting up.
     Quitting is by no means impossible, however. The federal Centers for Disease Control and Prevention estimates that 44 million Americans have done it. And even if the price increase, instead of inducing millions more to quit, merely reduces the number of cigarettes consumed by today's smokers, the effect on public health would be positive.
     "The health risk is related to the amount of intake . . . , " said Jack Henningfield, a professor of behavioral science at Johns Hopkins Medical School in Baltimore. "It's not an all-or-nothing issue."
     And, more important to Congress, is the hope that higher prices would keep future Tymiko Joneses from starting to smoke as teens. Research suggests that price increases probably would keep many teenagers from developing the habit that is so hard to break.
     The bill approved by the Senate Commerce Committee lifts the cost of cigarettes by 65 cents a pack in the first year on the way to $1.10 after five years. In states that already levy stiff taxes on tobacco, the price easily could exceed $4 a pack for premium brands such as Marlboro.

     Burden to Fall on Today's Smokers
     The legislation, which is expected to come to a Senate floor vote at the end of May, is aimed at stopping tomorrow's smokers before they start. But its financial burden would fall almost entirely on today's smokers.
     Although 6% of the nation's nearly 50 million smokers are under 18, they account for just 2.4% of total cigarette sales, according to the CDC. Nearly half of federal tobacco taxes are paid by people earning less than $30,000 a year, compared with less than 1% paid by those who make more than $100,000, according to Congress' bipartisan Joint Committee on Taxation.
     "It is hard to imagine a more regressive tax hike. And in magnitude it swamps any other tax proposed or enacted in recent memory," said J.D. Foster, executive director and chief economist for the Tax Foundation, a nonpartisan Washington organization that studies tax policy.
     "Essentially we're going to tax the 45 million Americans who were the unfortunate kids who started smoking at age 14," said Donald Garner, a law professor at Southern Illinois University.
     Most of those 45 million Americans probably believe that they have enough problems as it is. Dave, a 33-year-old carpenter and Marlboro smoker from rural Warrenton, Va., said of the proposed cigarette price increase: "It stinks that they are going after smokers. Every time the government wants some money, it's 'Let's tax the gas, everybody drives. Let's tax the smokers, a lot of people smoke. . . . ' They always go after the little people."
     The Senate Commerce Committee went to great pains not to call its proposed price increase a tax, much as it may look like one. Cigarette manufacturers would be required to pay annual lump sum amounts to the government and pass along the cost to consumers.
     Tax or not, economists say higher prices likely would lead many adults to reduce their daily cigarette consumption--and some to reduce it to zero. Smokers typically say that, if Congress voted a price increase of the magnitude approved by the Senate Commerce Committee, they would smoke less.
     "I definitely wouldn't like it if the price goes up like that--not to say I wouldn't buy them," said Dave, who asked that his last name not be used. "I'd probably try to limit myself."
     For smokers like Dave, the cost of quitting is high. A seven-day starter kit for the nicotine skin patch costs close to $30, and the follow-up kit for the next two weeks costs $48. Nicorette gum costs just about as much.
     "Those things are like 40 or 50 bucks a box," Dave said. "I can buy three cartons of cigarettes for that."
     The Congressional Budget Office surveyed the literature on the effect of tobacco price increases on smoking rates and found that, for adults, every 10% increase in price could result in an immediate decline of 2.5% to 5% in the number of packs sold.

     Rates Expected to Maintain Drop
     More than that, smoking rates are expected to continue to decline even without federal legislation. The bottom line: The CBO says that cigarette consumption might fall between 23% and 45% over the next 25 years, depending on how much Congress raises the price.
     "People who are on the verge of quitting tend to stop, or at least some of them do," said Willard Manning, a health economist at the University of Chicago. Over the long term, he said, the effect is likely to be compounded as fewer teenagers start and more adults reduce their consumption.
     Most economists and health experts believe that kids are more sensitive to price than adults. Smoking by adolescents in Canada was cut in half during the 1980s when the price of cigarettes doubled to more than $4 a pack. When the increase was later rolled back, teen smoking rates increased, although they have not reached the levels that prevailed before the tax increase.

     CBO Admits Its Prediction Optimistic
     The CBO, in a prediction that it admits might be "exceedingly optimistic," finds a likely reduction of 5% to 7% in the number of teens who begin smoking for every 10% price increase.
     The different conclusions reflect in part divergent views of how kids approach the decision to smoke.
     "Kids have limited incomes and they have other things they are spending their incomes on--compact discs, sneakers, movies," said Frank Chaloupka, an economist at the University of Illinois at Chicago. "They have to face choices and it turns out that, when pricegoes up, they are cutting back on cigarettes."
     However, another view holds that since kids buy fewer cigarettes than adult smokers, they are less likely to cut back when prices rise.
     And some young people, including Javier Ruiz, a freshman at Montgomery College in Maryland who started smoking when he was 16, may not feel the price increase at all.
     "I usually [bum] cigarettes from my friends . . . ," Ruiz said. "I don't want to spend my money on cigarettes." He smokes between half a pack and two packs a day, depending on whether he's "partying."
     Further evidence that kids pay scant attention to price is that they buy premium brands, which are the most expensive. According to a 1994 CDC study, the most popular cigarette brands among adolescents were Marlboro, Camel and Newport. While these brands accounted for only 35% of the overall U.S. cigarette sales, 86% of adolescent smokers purchased one of the three.
     "Many of those teenagers say they smoke because of peer pressure and family influence," said Jan Smith, a spokeswoman for cigarette maker R.J. Reynolds. "When you have youths who didn't buy cigarettes to begin with and when you look at peer pressure and whether a family member smokes, those things cannot be fixed with an excise tax."

Two-thirds of Americans try cigarettes at some point when they are young and 70% of them go on to become smokers, according to the CDC. Some experts say the most that can be expected of a sudden price increase is a reduction in the numbers of kids who become heavily addicted.
     "Is raising the price the answer to stopping a kid from ever trying a cigarette? Probably not," said Henningfield, the Johns Hopkins professor. "But is it a solution to discourage chronic daily use? There I think the answer is unequivocal. . . . Price is a tool to lower the consumption of every consumer product that we know of, including addictive drugs such as nicotine."
     Times staff writer Dennis Freeman contributed to this story.
 

     Who Bears the Tax Burden?
     The share of federal cigarette taxes and total federal taxes--income, payroll and excise--paid by taxpayers in various income levels this year:
 

Income             Share of federal  Share of total
level                 cigarette tax   federal taxes
$0-$10,000                      12%               *
$10,000-$20,000                 17%              2%
$20,000-$30,000                 18%              5%
$30,000-$40,000                 16%              7%
$40,000-$50,000                 11%              8%
$50,000-$75,000                 18%             18%
$75,000-$100,000                 7%             15%
$100,000-$200,000                1%             21%
$200,000+                         *             24%

      Source: Congressional Joint Taxation Committee