TRADE TALK: News from NATO - September/October 2007
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By Thomas A. Briant, Executive Director, National Association of Tobacco Outlets |
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A Senate proposal would raise the current federal cigarette tax from $.39/pack by as much as $.61/pack, a 156.4 percent increase. This same 156.4 percent tax rate increase would also be applied to the federal tax on all other tobacco products including cigars, little cigars, pipe tobacco, and smokeless tobacco. The other proposal would authorize the FDA with broad powers to regulate the manufacture, advertisement and sale of cigarettes, smokeless tobacco, and potentially all other tobacco products as well. Tax Increase LoomingThe most pressing federal issue has been the proposed increase in the cigarette and tobacco excise taxes. The impetus behind these tax increases is a proposal by Senator Gordon Smith (R-OR) to reauthorize and expand the State Children’s Health Insurance Program (“SCHIP”). This program has merit and provides federal funding to states to offer health insurance to children in low income families. However, the Congressional Budget Office estimates that a tax increase of this magnitude would result in an estimated 6 percent decline in cigarette sales. The enormity of the proposed tax increase has resulted in NATO coordinating a massive effort to encourage Congress to find an alternative funding source to expand the SCHIP program. Just in the past two months, NATO has faxed letters to all 535 U.S. Senators and U.S. Congressional representatives, sent alerts to all NATO members with petitions to have customers sign and then fax to senators and congressmen, published articles in trade magazines warning industry members about the tax increases, and submitted for publication two different commentary letters-to-the-editor to over 300 newspapers nationwide. Moreover, NATO has mailed personalized letters to every state governor, attorney general, revenue commissioner, and legislative leader emphasizing how much their states stand to lose in cigarette tax and national tobacco settlement payments if cigarette sales drop by the estimated 6 percent figure, hand-delivered NATO letters to all 20 members of the U.S. Senate Finance Committee, included a “Call to Action” on NATO’s website and participated in creating audio news releases distributed to radio stations focusing on the potential loss of jobs and security threats due to more robberies and theft. The progress of the SCHIP program bill in the U.S. Senate has slowed down due in part to the intensive effort of NATO and its members. Given that the potential economic impact to tobacco retailers, and, for that matter, the entire tobacco industry, is so great, NATO will continue fighting this unfair tax increase. One direct financial impact from the tax increase would be a significant reduction in sales of cigarettes and tobacco products. The CBO estimate of a 6 percent sales decline would mean a high likelihood of retail stores going out of business and a loss of retail jobs. Perhaps even a greater impact of these excessive tax increases will be a shift to black market cigarette trafficking and an elevated risk of store robberies because of the higher street value of cigarettes and tobacco products.
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NATO Fights Federal Legislation
With the U.S. Senate proposing the largest increase in the federal cigarette and tobacco tax since the taxes were first collected in 1864 and also considering legislation to grant the Food and Drug Administration regulatory power over all tobacco products, NATO has taken the lead to fight these federal bills through an extensive strategy of grassroots advocacy.
FDA Regulation