Vermont’s cigarette tax and benefits of a $1.00 increase

Vermont’s cigarette tax is $2.24. It’s vital that Vermont raise this tax by at least $1.00 bringing it to $3.24. Raising the tax is the single, most effective way to prevent youth from smoking. Coupled with a strong tobacco control program, it’s one of the best ways to help smokers to quit.

Raising the tax also makes sense because the revenues would go toward health care. Currently, 84.5% of revenues from Vermont tobacco taxes go to the State Health Care Resource Fund and 15.5% to Catamount Health. A $1.00 increase would provide $10.2 million in new revenue.

Current Northeast Cigarette Excise Tax, per pack:
New York $ 4.35
Rhode Island $ 3.46
Connecticut $ 3.00
Massachusetts $ 2.51
Vermont $ 2.24
Maine $ 2.00
New Hampshire $ 1.78
Region average: $2.76

RAISING THE PRICE OF TOBACCO IS AN EFFECTIVE TOOL TO PREVENT AND REDUCE SMOKING:

Studies have repeatedly shown that increasing the price of tobacco by at least 10% reduces adult smoking by 3-5% and youth smoking by about 7%. In addition, the CDC has found that low income smokers are four more times likely to quit than higher income smokers.

BENEFITS OF A $1.00 INCREASE IN VERMONT:
• Save $82 million in long-term health care costs
• Vermont would raise $10.2 million in new annual revenue
• Prevent 3,600 kids from becoming smokers
• Spur 2,000 current adult smokers to quit
• Save 1,600 residents from premature, smoking-caused deaths

A $1.25 TAX INCREASE HAS EVEN GREATER BENEFITS: $104.3 million in long-term health care savings; $12.1 million in new annual revenue; 4,600 fewer youth smokers; 2,500 fewer adult smokers; and 2,000 future smoking deaths avoided.

SUPPORT FOR A $1.00 INCREASE:
• A January 2009 Macro poll showed 82% of Vermonters supported increasing the state tax on cigarettes by $1.00 in order to keep Catamount Health, Dr. Dynasaur, and other state health care programs affordable for low income Vermonters.
• A nationwide poll in January 2010 found 67% of voters support a $1 tobacco tax increase.

VERMONT TOBACCO TAX HISTORY:
• In 2002 the Coalition ran a successful campaign to increase cigarette taxes from $0.44 to $1.19 per pack over two years.
• In 2006 the Coalition ran another successful campaign to increase the tax on cigarettes by $0.80 over two years, bringing the total to $1.99 per pack.
• In 2009, the legislature increased the tax by $0.25 to its current level of $2.24.

2010 – 2011 Legislative Agenda

Legislative and Policy Priorities:

1. Maintain level funding for Vermont’s Tobacco Control Program
2. Increase the state’s cigarette tax by $1.00 to $3.24.
3. Protect the Tobacco Trust Fund to sustain the Tobacco Control Program
4. Increase access to smoking cessation services for Vermont Medicaid recipients

Tobacco Use in Vermont:
Tobacco use causes 830 Vermont deaths each year. It is the single most preventable cause of death and disease in Vermont. Approximately 84,000 adult Vermonters and 6,000 youth in grades 8 through 12 identify themselves as current smokers. Treating smoking-related illness in Vermont costs $233 million every year, $72 million of which are taxpayer funded Medicaid expenditures. Add on to that the $192 million in productivity losses each year caused by smoking-related illness and the total is a $425 million smoking-caused price tag for Vermont.

Overview:
Vermont’s comprehensive Tobacco Control Program is based on science and brings together partners from the Department of Health, Education and Liquor Control as well as healthcare providers, community organizations and businesses to coordinate program efforts across the state. In this economic downturn, when state spending is especially scrutinized, it’s important to note that the Tobacco Control Program is evaluated and based on proven results.

Comprehensive Tobacco Control Program Funding:
Adequate funding for Vermont’s Tobacco Control Program is necessary to ensure continued progress in the reduction of tobacco use in Vermont. The Coalition for a Tobacco Free Vermont calls for level funding of $4.5 million dollars for the Tobacco Control Program.

Vermont has made significant progress since the Tobacco Control Program began:
• Adult smoking prevalence has been reduced from 22.4% to 17%
• Youth rates have dropped from 33% to 16%
• Nearly 90% of Vermonters with kids prohibit smoking in their home (doubled since 2001)
• Vermont is already saving $4 to $5 million each year in Medicaid costs

But, more work needs to be done. Smoking is costing Vermont:
While the state’s Medicaid costs are skyrocketing, currently, more than a third of adult Medicaid recipients still smoke. And there are other populations with high smoking rates:
• Low income 36%; people with moderate or severe depression 44%
• The smoking rate for high school seniors and young adults is over 20%
• The youth smoking rate has not changed since 2005

We need to prevent cuts to the program and ensure its long-term health:
The Tobacco Control Program has been cut by $700,000 over the past two years. Though the Legislature was able to prevent much larger cuts proposed by the Governor (using $1.5 million from the Tobacco Trust Fund to supplement the program in FY10 and $1.2 million in one-time General Fund monies to supplement the program in FY11) the program could be at great risk.

If those General Fund monies aren’t used again, or the Legislature does not make a commitment to restore MSA dollars to the Tobacco Control Program that were used for other purposes, the program could be facing a spending level of only $3,315,039 – its lowest point ever. The result would be devastating cuts to public education, nicotine replacement therapy, local community coalitions and hospital cessation services

Protecting the Tobacco Trust Fund:
The Tobacco Trust Fund was established to provide a long-term, sustainable funding source for the Tobacco Control Program. Master Settlement dollars (MSA) were appropriated to the fund during the first three years that it was established, but no additional money has been invested.

Compounding the problem, the Legislature in recent years has borrowed millions of dollars from the trust fund to pay for other programs and help cover projected deficits in the state’s budget – almost $6 million last year and $8 million the prior year—leaving the Trust Fund with a balance of only $17.6 million. We urge legislators to stop this reliance on the trust fund to fill budget gaps or we could be without a trust fund in less than three years.

Since the Trust Fund was created to ensure that Vermonters have access to an effective Tobacco Control Program for years to come, the Coalition recommends that legislators take action to guarantee that the Trust Fund is stable for years to come, such as:
• Not overprescribing Master Settlement dollars
• Ensuring unspent funds go back to the Trust Fund
• Not tapping into Trust Fund earnings

Increasing the State’s Cigarette Tax:
Vermont’s cigarette tax is $2.24. It’s vital that Vermont raise this tax by at least $1.00 bringing it to $3.24. Raising the tax is the single, most effective way to prevent youth from smoking. Coupled with a strong tobacco control program it’s also one of the best ways to get smokers to quit.

Studies have repeatedly shown that increasing the price of tobacco by at least 10% reduces adult smoking by 3-5 % and youth smoking by about 7%. A $1.00 increase would prevent 3,600 kids from becoming smokers and spur 2,000 current adult smokers to quit. A $1.25 increase would bring even greater benefits – preventing 4,600 kids from smoking and spurring 2,500 adults to quit.

Raising the tax also makes sense because the revenues would likely go towards health care. Currently, 84.5% of revenues from Vermont tobacco taxes go to the State Health Care Resource Fund and 15.5% to Catamount Health. A $1.00 increase would provide $10.2 million in new revenue. A $1.25 increase would raise an extra $12.1 million.

Increasing Access to Smoking Cessation for Medicaid Recipients:
People in Medicaid smoke at a much higher rate than the general population. Failing to help these smokers quit is extremely costly to our taxpayer-funded Medicaid program. In 2004, Vermont’s Medicaid program spent $72 million on tobacco-related health care costs – that was 8.98% of total Medicaid spending. The Coalition for a Tobacco Free Vermont has undertaken a collaborative project with the Vermont Department of Health and the Department of Vermont Health Access to reduce barriers to help Medicaid smokers who want to quit do so as effectively and seamlessly as possible.

The Coalition supports the tobacco program budget recommendations submitted by the statutorily mandated Tobacco Evaluation and Review Board (TERB).

Click below to view TERB's recommendations for 2008.

Download "Tobacco Board Recommendations"