NSU professor co-authors paper on tobacco tax

(Tahlequah, Okla.)-- A Northeastern State University professor of economics was one of three noted health economists who recently authored a research paper estimating the effects of increasing the cigarette tax rate in Oklahoma.

NSUs Dr. Fritz Laux, along with two other professors from the University of Illinois, found that increasing Oklahomas cigarette tax rate would produce a large, sustained increase in state revenues.

Our point was that, at a time when we face difficult choices over possible tax increases, the potential elimination of sales tax exemptions and alternative program cuts, the state also has the option of considering increases to the cigarette tax. We estimate that, for a $1.50/per pack increase in cigarette taxes, more than $183 million per year in new revenues could be raised to help close the state's roughly $1 billion budget gap, Laux said.

Despite the decline in smoking and increase in cross-border purchasing that would be prompted by such a cigarette tax increase, tax revenues still rise because the increased tax per cigarette pack brings in much more new revenue than is lost by the decline in packs sold.

The state also benefits from this deterrent to smoking, as burdensome tobacco-related health care costs are significantly reduced.

Laux explained that by standard national estimates scaled to the Oklahoma population, this tax increase would be expected to prevent 31,800 young people in Oklahoma from picking up the smoking habit in its first year. It would also encourage smokers to quit, thus saving 18,000 Oklahoman lives per year in the long run.

With these public health impacts, the state could expect to see a $1.25 billion savings in long-term health care costs borne by the state, he said.

Their research was one of the main issues discussed by Gov. Mary Fallin during her State of the State Address on Feb. 3, 2016.

Fallin said: Smoking is Oklahomas leading cause of preventable death and it costs our state $1.6 billion in related health costs each year.

Laux noted after Oklahoma's 2005 increase in cigarette taxes, where the cigarette tax rate increased by more than 300 percent, state revenue collections increased massively. This was even after accounting for reduced smoking, shifts to tribal sales and smuggling.

This same period also saw an improvement in public health.

In summation, the research paper concluded:

• Significant cigarette excise tax increases generate significant increases in cigarette tax revenues,
• Revenues several years after the tax increase remain significantly higher than revenues prior to the tax increase and changes over time after the increase are consistent with changes that would result from underlying downward trends in cigarette smoking,
• Even in states such as Arizona, which dedicated a large chunk of new cigarette tax proceeds to help people quit, total cigarette tax collections jumped significantly and stayed considerably higher after these kinds of tax increases.

View the complete research paper entitledA Significant Cigarette Tax Rate Increase in Oklahoma Would Produce a Large, Sustained Increase in State Tobacco Tax Revenues(pdf).

Lauxs fellow researchers were experts from the University of Illinois, Dr. Frank J. Chaloupa, distinguished economics professor, and Dr. Jidong Huang, senior research scientist.

The National Cancer Institute of the National Institutes of Health, under the State and Community Tobacco Control Initiative supported the research.