Legislature(2003 - 2004)
03/25/2004 01:43 PM Senate L&C
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
SB 368-TOBACCO TAX; LICENSING; PENALTIES
CHAIR CON BUNDE announced SB 368 to be up for consideration.
MR. JOEL GILBERTSON, Commissioner, Department of Health and
Social Services (DHSS), explained why it is important for the
state to address the tobacco levy this year. It is the number
one public health crisis threatening the state of Alaska
according to a new report called Tobacco in the Great Land - A
Portrait of Alaska's Leading Cause of Death, published Feb 2004.
He summarized:
Tobacco is the number one cause of death, disability
and chronic illness in this state. We have already
seen in Alaska, alone, the impact of increasing the
tobacco tax on consumption of tobacco products. Since
1997, which is the year in which the most recent tax
was increased, we've seen a 30 percent decline in the
consumption of tobacco products in Alaska. Those are
round numbers done for the section of Epidemiology.
It's also true to say that there is an absolute link
between the price of a tobacco product and its
consumption both by youth and adults. Increasing the
unit price of tobacco products is one of the most
effective ways in deceasing the utilization of tobacco
products by minors. Young individuals have limited
resources; they are least prepared to afford higher
tobacco prices and for that reason we see a very
beneficial affect on the consumption of tobacco
products by minors.
As youth are especially sensitive to the proposed $1
per pack tax increase, we believe this will add to the
50 percent decline we have seen in the consumption of
tobacco since 1995. In 1995, we conducted a
statistically valid youth risk behavior survey and we
have completed another statistically valid survey in
2003, just last year. The numbers between those two
studies have shown a 50 percent decline in
consumption. We believe that can be built upon and
additional successes can be realized with the increase
in the tobacco tax. A further drop in youth smoking of
just 15 percent from the current levels would
translate to 1,800 lives saved from premature death
due to smoking.
Adults will also see a great benefit from this tax
increase, because it is also an effective way of
discouraging continued use of tobacco products and to
incentivize the use of tobacco cessation programs. It
is estimated that the increased cost of purchasing
cigarettes following this tax increase will lead to
about 350,000 adult smokers to finally quit smoking.
For every 3,500 smokers who quit, that means you'll
have about 800 individuals who will not die because of
a smoking caused death.
We have some other vulnerable populations in the state
as a result of tobacco consumption. Smoking among
expectant mothers would also reduce significantly and
we believe that this would result in an estimated 850
babies being spared from exposure to maternal smoking
while in utero during the next five years.
With the smoking prevalence of 44 percent, Alaska
Natives have the most to benefit from this program.
Alaska Natives disproportionately consume tobacco
products. It's one of a number of unacceptable health
disparities that we're working in the department to
correct. We see it in suicide, we see it in alcohol
consumption, but it's also in tobacco consumption. The
Alaska Natives who smoke is nearly double the rate of
non-Natives. Among the high school population, of
those who participated in the youth risk behavior
survey, smoking is almost four times that of the non-
Native population. We believe that is another great
reason to move ahead with the tobacco tax increase.
This reduction in Alaska's health burden due to
tobacco will translate into health care cost savings.
Within five years, Alaska's health care savings from
fewer smoking related pregnancies and births will
amount to $1.6 million in savings and that came from
the Campaign for Tobacco-Free Kids.... In 1998, the
medical expenditure cost in this state, alone, was
$133 million as a result of tobacco consumption. In
terms of lost productivity just because of tobacco
related deaths was $137 million. That does not include
illness, sickness, breaks - that's just deaths from
tobacco.
This proposed increase will raise $45.5 million.... I
would say that we did look at some of the econometric
studies that were done. We looked at the 17 largest
econometric studies and they analyzed the effects of
price increases on tobacco use prevalence and
consumption in the general population. In every single
study, in each one of the 17 econometric studies, they
did find a correlation between an increase in price
and a decrease in consumption of tobacco products.
That has ranged from 1.5 to 3.7 percent. It's more
acute in juvenile populations. There are strong public
health reasons.
I started out by saying that tobacco is the number one
public health problem for the State of Alaska. It is
our leading cause of death; it is our leading cause of
disability; it's our leading cause of chronic illness
and I can go through a litany of health care
complications that come from tobacco consumption. I
think you're aware of them and, ironically enough, so
are smokers. We did do an analysis of what smokers,
themselves, think of the health consequences of
smoking.... Alaska ATS in 2003, found that 5 of 6
Alaska adults who smoke wish they could quit. Of 85
percent that were surveyed, 85 percent said that they
would like to quit and would like to have assistance.
Three out of four adults who smoke believe that people
should be protected from second hand smoke.
We know there's a public health problem here and this
is an appropriate step to bring our tobacco tax in
alignment with other states, but also to insure that
we're protecting young people from beginning to smoke.
People don't start smoking when they are 30, 40 or 50.
Some do, but very few. Most start when they are under
the age of 18. The more we can do to make the cost
prohibitive for the consumption of tobacco products,
the less we will have of downstream consequences of
tobacco. On behalf of the governor, I urge your
consideration of this bill and moving it forward.
CHAIR BUNDE observed that during the previous tobacco tax war,
many people didn't believe that price would have any impact, but
later acknowledged that the consumer was affected by price. He
said a lot of people wanted to testify on this issue and limited
the time to two minutes a person.
MR. STEVE PORTER, Deputy Commissioner, Department of Revenue,
said the governor totally supported this bill, which increases
the excise tax from $1 to $2 per pack. The total revenues for a
fiscal year is estimated to be $35 million.
MS. JOHANNA BALES, Program Manager, Cigarette and Tobacco
Products Excise Tax, Department of Revenue, pointed out that
this bill has some clean up measures from old tax law in the
first sections that weren't addressed last year when the
cigarette excise tax stamp legislation passed. The issue of
double taxation where the tax had to be paid again in state if
the licensee was from out of state and had already paid the tax.
A couple other items had to do with technical corrections to the
same legislation. Current law has no provision that allows a
distributor who makes sales of product out of state to get a
credit for taxes that may have been paid in Alaska. Now there is
a credit provision. Another issue was corrected by providing
credit for tax stamps that get lost in transit.
The new legislation increases the cigarette tax from $1 to $2
per pack. Tax on other tobacco products would increase from 75
percent to 100 percent of the wholesale price. There are also
forfeiture provisions, which means if someone imports unstamped
cigarettes into the state for sale, that the state would be able
to seize assets that were used in the commission of that crime,
which is a felony tax evasion.
The final, major, provision would require a floor stock tax to
be paid on all inventories that are currently in the state at
the time of the effective date of the act. A floor stock tax is
the difference between the old and new tax rates. Every person
who stocks cigarettes for sale would be required to take an
inventory and pay the tax to the Department of Revenue within 30
days. This is an important provision because in 1997 when the
tobacco tax was originally increased without a floor stock tax,
a significant amount of stock piling occurred. She estimated
about 200 million sticks of cigarettes were stockpiled primarily
by retailers who didn't pass the savings on to consumers.
Approximately $7 million of revenue was lost and the department
received numerous complaints about it.
MS. CAROLE EDWARDS, Alaska Nurses Association, said she has been
an oncology nurse for 20 years.
The Alaska Nurses strongly support the tobacco tax.
Tobacco use, as you know, is directly linked to cancer
and it is the most preventable cause of death in our
society. Second-hand smoke causes illness and death to
innocent victims who have chosen not to smoke or in
our children who cannot make that decision for
themselves.
Tobacco use is alarmingly high in our Alaska Native
population, particularly in children and adolescents.
Statistics do show that increased cost of tobacco
decreases the use particularly in our youth.
MS. EDWARDS related a short story about how she became a
cigarette smoker at the age of 17. She tried to quit many times,
but was unsuccessful, even after her second child was born seven
weeks prematurely and almost died. "It is an extremely addictive
disease and very difficult to quit once you have started." She
finally quit when her husband left the army and she didn't have
access to cheap cigarettes any more. This happened 31 years ago.
MS. JENNIFER APP, Alaska Advocacy Director, American Heart
Association, strongly supported SB 368.
Cardiovascular disease takes a big toll in the State
of Alaska. It is the number one cause of death in this
state, if you combine heart attacks and strokes. The
number one preventable cause of cardiovascular disease
is cigarette smoke.
She supported the testimony of Commissioner Gilbertson regarding
the costs of smoking.
If we actually wanted to recoup the amount of money
that this state subsidizes every year in terms of
taking care of people sickened by cigarettes or in
terms of lost productivity, we would need to tax each
pack of cigarettes at $6.38 per pack. So, when we talk
about increasing this tax to $2 a pack, we're not even
making up the difference. So, I really urge this
committee to think hard about both the financial
aspects and also the important health costs.
MS. CHRISTIE GARBE, Director, American Lung Association,
strongly supported SB 368.
High school smoking rates have dramatically dropped
since 1995 and it's a commitment from all these
program elements working together. One of the big
features in that was increasing the tax in '97. What
we're talking about is children not picking up that
first cigarette... and don't have to quit later....
I just heard yesterday in the Alaska Tobacco Control
Alliance meeting [that] the number one cause of cancer
with Alaska Natives is now lung cancer and this has
come upon them as a new horizon and this is a very
serious problem.... The reason we are here today
supporting the tax has nothing to do with the revenue.
It has only to do with lives saved and future health
care costs reduced.
MS. MARIAH WARREN, Alaskan resident, said she is a student at
the University of Alaska Southeast and works at a local super
market and it's very apparent to her that the cost of cigarettes
has a very direct link to who smokes. She fully supported SB
368.
MS. EMILY NENON, Alaska Advocacy Director, American Cancer
Society, supported everyone's testimony and passage of SB 368.
CHAIR BUNDE asked her what percentage of the general Alaska
public supported the tobacco tax.
MS. NENON replied that 67 percent of Alaska voters support
increasing the tobacco tax. The support is the same whether it
is at 50 cents or $1. There is consistent support from all
regions of the state.
MS. DORIS ROBBINS, Juneau resident, said she is on a crusade
against tobacco. She agreed with everything that has been said
here today. The tax would obviously lower the number of kids
starting to smoke and encourage adults to stop. She has read
biological data that says when children get addicted to
something, it is much harder for them to stop. Something happens
to their brains in their formative years. She also heard Dr.
Urata say on KTOO radio that if tobacco was introduced as a new
product today, the Federal Drug Administration (FDA) would never
allow it to be put on the shelves.
MS. ROBBINS thought that stopping kids from ever starting was
important, but focusing on the cost was important as well. Data
from Alaska Tobacco-Free Kids said that in 1998, $60 million was
spent in Medicaid costs for tobacco related illnesses.
TAPE 04-27, SIDE A
MS. ROBBINS related how a friend of hers died last year after
contracting pancreatic cancer from smoking. She lasted about
four months and in that time she used all of her savings and had
to go to the hospital because the pain was so severe she could
not be at home. She spent the last months of her life in the
hospital trying to relieve pain.
Personally, she has permanently reduced lung function and asthma
caused by second-hand smoke and has to take daily medications to
be able to breath. That costs her $4,800 per year if she doesn't
get sick. She pointed out that a few people in senior housing
smoke and it affects all the other people who live there; she is
personally trying to help one of them now.
Apparently, smoking is allowed in all [senior] Alaska
housing which is partially financed with state
funding. In order to save the state money, we need to
look at tobacco as a whole - what it is costing the
state. I look at this tobacco tax as pre-insurance for
tobacco users, because they're going to wind up at the
end of their ropes on Medicaid.... This is a big bill
for the State of Alaska.
MS. MARGUERITE STETSON, State Coordinator for Advocacy, AARP
Alaska, supported SB 368.
...a higher tobacco tax will help prevent our youth
from beginning to smoke. It will also help some
current smokers to stop. If raising the cost of a pack
of cigarettes helps prevent any of Alaska's
grandchildren from starting to smoke, we are strongly
in favor of it.
We are concerned with the data in the governor's
transmittal letter indicating that Alaska Natives, and
particularly Alaska Native high school students, smoke
at a much higher rate than the non-Native population.
We strongly recommend that some of the new revenue
coming in to state government from the tax increase be
used to target cessation efforts to Native smokers
and, in particular, to our Native youth.
This week we heard a report from the Medicare trustees
indicated that health care costs were higher than
expected. In AARP, we worry about Medicare's financial
status. We also know that Medicare would be in better
financial shape if so many current retirees had not
been smokers. Increasing tobacco taxes in Alaska has
immediate beneficial health consequences. It also will
have beneficial long-term financial consequences for
both Medicare and Medicaid. SB 368 is good economic
policy and good health policy. It makes sense and it
is fair.... Thank you.
MS. JOELLE HALL, mother of two young children, said when they
reach 12 and 13 years old, she really hopes that smoking is cost
prohibitive for them.
I hope you will consider this inflation proofing of
Alaska's tobacco tax and that you will consider doing
it again in a couple years, because I think we need to
keep it expensive and keep it away from our kids.
Thanks.
MS. KATTARYNA STILES, Alaska Native Health Board, said:
I do think this proposal is a good idea. It's a good
idea because it will save lives. It's a good idea
because it will raise money; and it's a good idea
because it will reduce health care costs....
She supported previous testimony, especially comments on what it
means particularly to the Alaska Native community.
In western Alaska, among pregnant women, the tobacco
use rate is as high as 67 percent. Sixty-seven percent
of any demographic using tobacco is unacceptable, but
100 percent of those unborn children are ingesting
tobacco products.
CHAIR BUNDE asked if anyone else wanted to testify. There was no
response and he closed public testimony. There were no
amendments and he asked the will of the committee.
SENATOR SEEKINS moved to pass SB 368 from committee with
attached fiscal note and individual recommendations.
CHAIR BUNDE asked for a roll call vote. Senators Hollis French,
Ralph Seekins, Gary Stevens, Bettye Davis and Chair Con Bunde
voted yea; and SB 368 moved from committee. There being no
further business to come before the committee, he adjourned the
meeting at 3:30 p.m.
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