Includes 9/6, 9/18/93

Items:

Federal:

Cigarette Taxes for Health Care Buckling under Tobacco States' Pressure

Health:

Heart Disease Begins in Childhood, Study Finds
US SIDS Study Finds Maternal Smoking a Danger Both before and after Birth
Second-Hand Smoke Listed as One of Ten "Hidden Dangers"

International:

Spain Trying to Control Smuggled Foreign Cigarettes
Cigarettes in Sarajevo: A Marriage Made in Hell
War on Tobacco Stepped up in Singapore
International Agreements Key to Worldwide Smoke-free Flights

Business & Society:

RJR Estimates $900 Million 1993 Loss.
Anti-Smoking Crusader Under Fire for Support of Off-the-Job Smokers
Judge Pays Shoplifters Fine, Slams Cigarette Vendor
Marlboro Ads Continue in Comic Books
Camel Cigarettes Advertised Nightly on David Letterman

CIGARETTE TAXES FOR HEALTH CARE BUCKLING UNDER TOBACCO STATES' PRESSURE

President Clinton has indicated that he may be thinking of lower cigarette taxes to help pay for his health care reform bill. He had previously indicated that the taxes would be from 50 cents to $2 per pack, but seems to be leaning towards the low end of that scale. The present tax is 46 cents.

Lawmakers from tobacco-producing states, whose support was vital to the recent passage of Clinton's deficit bill, are exerting considerable pressure to keep a low tax, claiming that tobacco taxes should not be used to pay the full amount necessary for health care reform.

Rep. H. Martin Lancaster (D-N.C.) wrote to Hillary Clinton last July, "The North Carolina Democratic delegation voted unanimously for the president's budget and for reconciliation on the promise of the White House that tobacco would not be unfairly singled out to pay the cost of health care reform. If Dr. Magaziner continues to insist on tobacco as the only source of revenue, the White House should not expect to ever again get that kind of support from our delegation."

In addition, some legislators have estimated a $1 tax would put 44,000 people out of work, due to the decrease in consumption.

Antismoking groups criticized the idea of a 50 or 75 cent tax. Former surgeon general C. Everett Coop said, "If you raise the tax high enough, you will cut down on consumption and if you cut down on consumption, you save lives.". A $1 tax on cigarettes would not only finance the entire $16 billion needed for health care reform, but, the Coalition on Smoking OR Health estimates, it would save 1.1 million lives.

At a conference on Sept. 9, the Coalition showed the results of an April survey that showed 66% of voters support a $2 tax. Rep. Mike Andrews, D-Texas, of the House Ways and Means Committee predicted that the committee, usually favorable to tobacco interests, would approve a $1 increase, and that the full House could then bump that up to $2 through amendments. Many powerful Congressmen have stated that Congress would never pass a $2 tax.

Hard liquor (not beer or wine) may be partially taxed instead, even though excise taxes on liquor were increased just 3 years ago.

Recently, during negotiations on Clinton's deficit control bill, tobacco-oriented lawmakers had argued that a limit on the use of imported tobacco should be placed in the bill. Representative Charles Rose (D-NC) in defending the idea, pointed to the $1 to $2 proposed cigarette tax and said, "we can live with that special treatment...if we get a little special treatment on imports." The deficit control bill now limits the use of tobacco imports in domestically produced cigarettes to 25%.

HEART DISEASE BEGINS IN CHILDHOOD, STUDY FINDS

A recent study examining the arteries of people who died from violent means between the ages of 14 and 34 found that hardening of the arteries (atherosclerosis, wherein artery walls thicken with deposits of fat, cholesterol and other substances) begins in childhood and increases with age. The authors of the study wrote, "Many of the risk factors originate in youthful behavior, with patterns of diet, physical activity and tobacco use persisting from adolescence into adulthood; the earlier they begin, the more difficult it becomes to modify them."

Dr. Jack Strong, professor and head of pathology at Louisiana State University Medical Center said the study showed the need to focus on programs to prevent these risk factors in youth.

The study was published in the AHA journal Arteriosclerosis and Thrombosis.

US SIDS STUDY FINDS MATERNAL SMOKING A DANGER BOTH BEFORE AND AFTER BIRTH

The latest data from the National Center for Health Statistics finds that the risk of SIDS is 3 times greater in babies of smoking mothers than in babies of non-smoking mothers. The babies of mothers who quit smoking during pregnancy but who resumed smoking after birth are 2 times more likely to die of SIDS.

The study suggests that the higher death rate is not completely due to smoking's effect on the uterus, and that the danger persists if the baby is exposed to second hand smoke after birth.

SECOND-HAND SMOKE LISTED AS ONE OF TEN "HIDDEN DANGERS"

September 2, 1993. The Coalition for Consumer Health and Safety released a pamphlet today detailing commonly known but largely ignored "hidden hazards", which included environmental tobacco smoke. The ten hazards, in unranked order, are:

• The effects of secondhand tobacco smoke.
• The risks of excessive drinking.
• Poisoning from improperly cooked foods.
• Rollover crashes in sport and utility vehicles.
• Failure to use lap belts in cars.
• Not wearing bicycle helmets.
• Infant drownings in five-gallon buckets.
• Falls from playground equipment.
• Falls and burns caused by baby walkers.
• Sexually transmitted diseases from improper contraceptive use.

The free pamphlet may be ordered by sending a stamped self-addressed envelope to: Hidden Hazards, Consumer Federation of America, 1424 16th St., N.W., Suite 604, Washington, D.C. 20036.

NAURA HAYDEN ON SMOKING AND SEX

"Smoking constricts the all the veins and arteries in the body, particularly those in the sex organs, so they can't fill up with blood. This is what we call impotent--a sex organ that won't or can't fill with blood and therefore can't get hard.

"When a person is a heavy smoker, the lung capacity is cut way down, and that cuts way down on your endurance and on the ability to last a while during intercourse. Try it. See what happens when you cut out the smokes for a month. If your sex life doesn't pick up considerably (and I mean your ability as a lover), then you can always go back to smoking.

"The good news about stopping smoking is that once a person stops, the body is totally cleared of all the tar and nicotine and assorted gunk in a matter of months. Several doctors have told me that people should never feel that because they've been smoking for years it wouldn't make any difference if they stop--that all the damage has already been done; that's simply not true. Your lungs will go back to their pre-smoking condition a few months after you stop."

From the underground best-seller, "How to Satisfy a Woman Every Time . . . and Have Her Beg for More!" -- Naura Hayden, Bell Publishing 1982

SPAIN TRYING TO CONTROL SMUGGLED FOREIGN CIGARETTES

September 1, 1993. Spain has instituted a new cigarette labeling program which specifies that only labeled cigarettes are legal and have been taxed. The Spanish government has given vendors till December to change over their inventory.

Nearly a fifth (500 million) of the 4 1/2 billion Virginia-style cigarettes sold in Spain yearly are smuggled into the country, mostly from Eastern Europe. Immigrants selling foreign cigarettes are a common sight in major cities.

The move was taken under pressure from Tabacalera SA (Spain's primary cigarette company) and tobacco vendors. Tabacalera is 52% state owned and controls 70% of the market Smuggled cigarettes are estimated to take from the government $160 million in tax revenue, and the problem is growing.

Spain's has a smoking rate of 40%, the highest in the European Community.

KOHL SAYS WET SNUFF SHOULD NOT IMPEDE SWEDEN'S ENTRY TO EC

September 2, 1993. German Chancellor Helmut Kohl, after meeting with Swedish Prime Minister Carl Bildt in Stockholm today, said that he would promote the entry of Sweden to the EC, and joked that he hoped Sweden's wet snuff use wouldn't stand in its way.

Wet Snuff is a national habit in Sweden, in which a ball of tobacco is kept under the lip. Brussels wants to keep it out of the EC on health grounds.

Kohl said, "I ask myself, if the Swedes want their snuff, what does it have to do with me down on the Rhine?. . . We spent a lot of time talking in Edinburgh (at the EC summit) about subsidiarity. The word alone is a problem, but for me, it means everybody should do what they are best at. We in Europe shouldn't decide what the sausage looks like and what it tastes like. What's important is that the label describes accurately what's in it. We have to work against the perfectionism that has entered community thinking"

Brussels is having a rocky history with tobacco. The EC wants to ban tobacco advertising in the European Community, but is staunchly opposed by a minority of countries, i.e., Britain, the Netherlands, Denmark, Germany and Greece. And a former head of the European Commission's tobacco division, under investigation for fraud in millions of dollars of subsidies paid Italian and Greek tobacco farmers, jumped to his death from his office onto a busy Brussels street last April.

CIGARETTES IN SARAJEVO: A MARRIAGE MADE IN HELL

September 5, 1993. In an article in the New York Times today, Chuck Sudetic looked closely at the social and economic aspects of cigarette smoking in war-torn Bosnia and Herzegovina. He makes the point that long-term health is not a big issue there, and quotes a soldier: "Smokers will tell you they can survive on only one meal a day if they can smoke." Says another: "I can usually calm down with a cigarette when I'm on the line."

Cigarettes are both a status symbol and a currency as stable as German marks or American dollars. In Sarajevo's central market, cigarettes go for $5-$10 a pack, and in Muslim sectors of eastern Bosnia for $50. A profiteer says, "You can buy a kilo of wheat flour, enough to feed yourself for 10 days, for the price of just one pack of cigarettes."

An interesting aspect is the continued operation of the local Sarajevo Tobacco Factory. It's a mile from the front line and the scene of sniper attacks, but it receives priority electricity, and has been able to produce 5 million cigarettes a month. A factory official said, "The tobacco stockpile (traditionally maintained at high levels for flavor consistency) is a state secret. We hope to maintain production through to the end of the war." The factory was licensed by Philip Morris to produce Marlboros, but with the lack of imports--or paper for other brand labels--the factory simply turns inside-out the Marlboro packaging.

Sudetic quotes Aida Albalic, a 25 year old lawyer: "I didn't smoke before the war, but when the fighting started, I was completely separated from my friends. The cigarettes were my company. I always used to criticize people who smoked. I had arguments with my family . . I have nothing against cigarettes anymore. When I hold a cigarette my hands don't shake."

WAR ON TOBACCO STEPPED UP IN SINGAPORE

September 1, 1993. Singapore instituted a tough new law today that fines anyone under the age of 19 caught with cigarettes $31, and fines anyone caught selling cigarettes to minors up to $6,200.

The new cigarettes laws come as Singapore's smoking rates are rising alarmingly, despite a national antismoking campaign and tough antismoking measures.

Singapore, a republic of 2.7 million people, is a unique experiment in social engineering. Littering is fined as much as $600; failure to flush public toilets is fined $30, chewing gum is banned, and Singapore itself is trying to become a completely smokefree society.

Singapore's official vision of its future stems from the 31-year-reign of Lee Kuan Yew who took multi-cultural "Fortress Singapore" from near destruction due to World War II and later terrorist campaigns to a spectacular financial, commercial and shipbuilding powerhouse. Yew once explained, "I say without the slightest remorse that we wouldn't be here, we would have not made economic progress, if we had not intervened on very personal matters -- who your neighbor is, how you live, the noise you make, how you spit, or what language you use. We decide what is right. Never mind what the people think."

INTERNATIONAL AGREEMENTS KEY TO WORLDWIDE SMOKE-FREE FLIGHTS

September 3, 1993. USA Today's Gene Sloan reports that the Clinton administration is trying to work with other countries to provide worldwide smokefree skies by 1996. The first agreement, with Australia, New Zealand and Canada is due to be concluded soon.

An Air Canada spokesperson said, "We've saved $600,000 (Canadian) a year on cleaning and maintenance alone...Smoke dirties air filters, carpets, seat covers...and then there's the man-hours required to empty ash trays after every flight."

The Association of Flight Attendants welcomes the move. "We get regular reports of cancer-related problems, headaches, dizziness and more, all from the poor quality of air," said a spokesperson.

British Air and Cathay Pacific recently announced non-smoking long-range international flights. "Our passengers want non-smoking flights now," said a spokesperson for British Air.

European carriers may be slower to join the movement. SAS recently backed off a smoking ban on European flights due to protests. "We're interested in our customer's health, but we're also interested in their business," said a spokesperson.

RJR ESTIMATES $900 MILLION 1993 LOSS.

September 11, 1993. In its second quarter earnings statement released today, RJR Nabisco, Inc. reported that it expected a $900 million loss in its business unit contribution (operating income before amortization of trademarks and goodwill) over the 2nd half of 1993. The drastic cut in contribution to the parent company (1993's tobacco unit contribution was $2.1 billion) was ascribed to the decrease in domestic cigarette revenue, a short-term increase in interest expenses (due to recent debt offerings and a preferred stock offering. The revenue from these will be used to pay down the higher cost debt that has nagged RJR since the KKR take-over), inventory buy downs, and marketing programs already committed to.

This loss falls in line with previous estimations of a 40% revenue decline, expected since RJR matched Philip Morris' premium brand reductions on "Marlboro Friday" last April.

The report expected a full return to increased profitability in 1994: "We plan to get our house in order this year so that we can resume our earnings growth track next year," the report said.

Fitch Investors Service lowered RJR's credit outlook from "stable" to "declining", though it said the rating was "mitigated by RJR's continuing strategy to reduce its debt interest cost."

Philip Morris also expects to lose 40% in tobacco revenue this year, which, owing to PM's larger size, could amount to a $2 billion loss for 1993.

ANTI-SMOKING CRUSADER UNDER FIRE FOR SUPPORT OF OFF-THE-JOB SMOKERS

Southern Illinois University law professor Donald Garner, an expert on how to sue tobacco companies, has raised ire in the antismoking community for the publication of his article "Protecting Job Opportunities of Smokers: Fair

Treatment for the New Minority" in the Seton Hall Law Review. Garner argues that companies that refuse to hire off-the-job smokers could lend credence to a tobacco industry campaign that holds smokers are a discriminated-against minority.. He says such policies could help lobbyists convince legislators to institute civil rights protection, creating a 50 million-strong minority with tremendous power.

One company that has such a policy is Ted Turner's Turner Broadcasting System, parent company of CNN. TBS employs 6,000 people. "Certainly if you have a healthier work force, you'll have to pay lower health insurance premiums," a spokesman said. "That's a nice by-product of an antismoking policy."

Richard Daynard of the Tobacco Liability Project in Boston, said, "The whole idea of trying to protect a class of people who have at least to some extent chosen a particularly hazardous and expensive life-style seems in principle wrong. I just think the political world in which Don is living is not the real one. I don't see the threat he sees."

Garner first attracted attention in the early 80s by arguing that tobacco companies could be sued for concealing the addictive nature of their product. Some cases have been tried on this basis, but none have been won.

JUDGE PAYS SHOPLIFTERS FINE, SLAMS CIGARETTE VENDOR

A judge in Lynwood, Washington fined a shoplifter for stealing 2 packs of cigarettes, then paid the fine himself, saying that the Safeway store was "more culpable than he is" for selling cigarettes in the first place. The shoplifter has a long rap sheet and is a registered sex offender.

MARLBORO ADS CONTINUE IN COMIC BOOKS

Sept. 7,1993. Another Marlboro advertisement has appeared in a comic book, this time in Samuree #1, published by Continuity Comics. The format of the ad is almost identical to a previous appearance last year in a Batman comic (#485). The familiar red and white Marlboro logo, offset by yellow and splashed against a page of blues, blacks and grays, is presented as part of a nighttime urban scene. The ads in both comics employ a similar color scheme (bright red, white and yellow against dark, muted colors), and, far from their ostensible roles as pieces of background, they are the brightest, most eye-catching elements on their pages. The Batman Marlboro ad is a rooftop billboard, the one in Samuree is atop a passing New York City taxi.

Jenette Kahn, editor-in-chief of DC Comics, when confronted last year by Mark Green of the New York City Department of Consumer Affairs, defended the practise as a striving for realism. A perusal of recent issues of Batman revealed no other mention of identifiable public figures or brand names. Batman lives in Gotham City and drives a Batmobile.

Continuity Comics, Neal Adams, Publisher, 62 W. 45 St., NY, NY 10036 212-869-4170

DC Comics, Jenette Kahn, Editor-in-Chief, 1325 6th Av., NY, NY 10019 212-636-5400

DC Comics is a division of Warner Bros.--A Time-Warner Entertainment Company

CAMEL CIGARETTES ADVERTISED NIGHTLY ON DAVID LETTERMAN

September 7, 1993. Within its introductory video montage, David Letterman's new show on CBS includes a large, readily-identifiable portion of the "Smooth Character" Camel billboard in Times Square, thus rendering ineffective the 1970 ban on cigarette advertising on television. A similar situation exists with the much-protested Marlboro billboard in the outfield of the Mets' Shea Stadium in New York City. The ad is often shown on TV during routine coverage of the outfield, or when a home run is hit..

CBS-TV, 51 W. 52 St., New York, NY 10019 975-4321

PRESIDENT CLINTON ON HEALTH CARE AND TOBACCO IN HIS SPEECH OF 9/22/93

"Responsibility also means changing some behaviors in this country that drive up our costs like crazy and without changing them we will never have the system we ought to have. We will never . . . Let me just mention a few, and start with the most important. The outrageous costs of violence in this country stem in large measure from the fact that this is the only country in the world where teenagers can rout the streets at random with semi-automatic weapons and be better armed than the police. (heavy applause)

"But...Let's not kid ourselves, it's not that simple. We also have higher rates of aides, of smoking and excessive drinking, of teen pregnancy, of low-birth-weight babies, and we have the third worst immunization rate of any nation in the Western hemisphere. We have to change our ways if we ever really want to be healthy as a people and have an affordable health care system. And no one can deny that."

***

"...And we _will_ impose new taxes on tobacco. These . . . (interrupted by applause). . . I also . . . (applause continues) . . . I don't think that should be the only source of revenues, I think we should also ask for a modest contribution from big employers who opt out of the system to make up for what those who are in the system pay for medical research, for health education centers, for all the subsidies to small business, for all the things that everyone else is contributing to.

But between those two things we believe we can pay for this package of benefits, and universal coverage, and a subsidy program that will help small business. These sources _can_ cover the cost of the proposal that I have described tonight.

Excise Tax Issues

WHAT IS IT?

An excise tax is a recently-introduced (c.1600) form of levy on specific domestically-produced products (as opposed to tariffs on foreign products). In the 18th century in the US, hotly-contested excise taxes were applied to various goods at various times. They were first applied to cigarettes during the Civil War, to help the Union's finances. During the World Wars they were applied to some luxury items, like furs. The first state excise tax on cigarettes was imposed in 1921. Today the few excise taxes left are applied basically to liquor and cigarettes.

DOLLARS AND CENTS

Local, state and federal cigarette excise taxes raised $11.3 billion last year. State excise taxes range from a high of 50-65 cents/pack ( in Washington DC, Hawaii, New York, Washington, and Massachusetts) to less than 7 cents/pack (in the Carolinas, Kentucky and Virginia.)

The Federal excise tax on cigarettes is 24 cents. The tax the Clintons are talking about is a tax _on top of_ the present tax. An ABC/Washington Post poll finds 65% of Americans in favor of raising the excise tax to $2/pack (an tax increase of $1.76).

RECENT HISTORY

Domestic tobacco excise taxes were last raised in 1991, at which time the cost-conscious tobacco companies began using a higher percentage of cheap foreign tobacco in domestic cigarettes. This made the tobacco-growing states fight for and win a provision in Clinton's deficit bill that domestic cigarettes could not consist of more than 25% foreign tobacco. (The previous limit was 33%.) The tobacco companies went along with the plan, with the understanding that the tobacco state legislators would use their considerable clout to keep the health-reform excise tax increase to not more than 24 cents.

HEALTH REFORM ISSUES

In regards to the health-reform bill, a $1-$2 tax was talked about originally as the only tax needed to pay the $105 billion needed over 5 years for the Clintons' plan. Lately, however, it has been indicated that the tax increase would be only 50 cents to $1. A 75 cent tax increase would only raise $11 billion a year, far short of the $21 billion a year needed. But even a 75 cent increase infuriates the tobacco industry, and they point to the liquor industry as a "more acceptable form of poison" that it would be hypocritical to ignore in any "sin tax" proposal. They feel liquor should help shoulder the burden. There is thus the possibility that the shortfall would be made up by new hard liquor taxes. This in turn infuriates the hard liquor industry, whose excise taxes were just raised 3 years ago. They point to the beer industry, "the beverage of choice of the young, the drivers," which everyone knows it would be "fraught with political peril" to go after.

THE TOBACCO TAX

Tobacco interests have indicated they could live with a doubling of the present tax of 24 cents. Recently Hilary Clinton met for a 35 minute meeting with North Carolina Democratic Representative Charlie Rose, during which, reportedly, she mentioned a tax increase of from 70-80 cents. Charlie Rose came out of the meeting saying, "The cigarette industry may be the first casualty in the health war" and "It's a long way from over when it comes to so-called sin taxes." He indicated that without some "sharing of the load" (by the liquor industry), the tobacco legislators could not support Clinton's health plan.

DIMINISHING RETURNS?

A further issue is that any rise in cigarette taxes will produce a decrease in consumption. All parties accept the statistic that for every 10% increase in price, there is a 4% decrease in consumption. Yet many feel that the addiction is so hard to break that it would take a huge increase in taxes to reach a point of diminishing returns.

Canada's experience seems to bear this out, to a point. Cigarette taxes rose 167% between 1984 and 1992, and consumption declined by 38%. Revenues rose by 71.4%.

However, a recent large tax increase yielded only 2/3 of the amount expected. This is thought to be due to both increased smokers' resistance and the booming market in US cigarette smuggling--which is responsible for 25% of Canadian consumption, according to the Canadian Tobacco Manufacturers' Council. Today Canada taxes cigarettes about US$3/pack, bringing the retail cost to about US$4.35.

END OF DOCUMENT