Michi Tobacco

MICHIGAN’S CIGARETTE AND TOBACCO TAXES 2007 Statistical Update

Office of Revenue and Tax Analysis Michigan Department of Treasury August 2008

MICHIGAN’S CIGARETTE AND TOBACCO TAXES 2007 Statistical Update

Office of Revenue and Tax Analysis Michigan Department of Treasury August 2008

Acknowledgments Scott Darragh prepared this statistical update under the direction of Howard Heideman, Director of the Tax Analysis Division, Office of Revenue and Tax Analysis, Michigan Department of Treasury. Diane Burton of the Office of Revenue and Tax Analysis provided editorial and production assistance.

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LIST OF EXHIBITS Exhibit

Page

1

Tobacco Tax Revenues...........................................................................................

3

2

Michigan Cigarette Tax Collections .......................................................................

4

3

Michigan Cigarette Tax Revenue as Share of Total State Tax Revenue................

4

4

Distribution of Tobacco Tax Revenue, Fiscal Year 2007 ......................................

5

5

Distribution of Tobacco Tax Revenue by Product, Fiscal Years 2001 – 2007 ......

5

6

Cigarette Packs Sold Taxed ....................................................................................

6

7

Annual Packs Sold Taxed .......................................................................................

7

8

National Cigarette Tax Trends................................................................................

8

9

State Cigarette Tax Rate Trends .............................................................................

9

10

State Comparisons, 2007 Cigarette Tax ................................................................. 10

11

2008 State Cigarette Tax Rates............................................................................... 11

12

Taxed Cigarette Consumption Trends .................................................................... 12

13

2007 Cigarette Prices and Sales, Ranking by Tax Rate.......................................... 13

14

Other Tobacco Products Tax Revenue, FY 2007 ................................................... 14

15

Percentage of Adults Currently Smoking Cigarettes, 2007.................................... 15

16

Prevalence of Cigarette Smoking and the Tax Rate on Cigarettes ........................ 16

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SUMMARY This report provides updated information on Michigan’s tobacco taxes. Michigan has levied an excise tax on cigarettes since 1947. The tax was increased by 50 cents to $1.25 per pack of 20 cigarettes in August 2002, and increased again by 75 cents to $2.00 per pack in July 2004. The Michigan tax is in addition to the federal cigarette tax of 39 cents per pack. The state tax on tobacco products other than cigarettes is 32 percent of the wholesale price. Tobacco tax revenue totaled $1,129.2 million in fiscal year (FY) 2007, down $39.9 million from FY 2006. This represented a 3.4 percent decrease in tobacco tax revenues compared to FY 2006. Tobacco taxes now account for 4.8 percent of all Michigan taxes. Exhibits 1 through 3 compare Michigan tobacco tax collections over the past thirty years. Tobacco taxes provide revenue for a number of purposes. For FY 2007, 39.9 percent of tobacco tax revenues were earmarked to the School Aid Fund and 33.4 percent of revenues were earmarked to the Medicaid health program for low-income residents. Exhibit 4 presents the distribution of FY 2007 revenues by fund. Exhibit 5 highlights the growth in tobacco taxes over the past six years, separating tobacco tax revenue between cigarettes and other tobacco products (cigars, snuff, and pipe, chewing, and roll-your-own smoking tobacco). Cigarette consumption has declined in recent years. Taxable cigarette sales decreased in FY 2007 by an estimated 4.2 percent to 550.3 million packs sold taxed. Much of the decline in consumption is probably due to reductions in cigarette smoking due to the higher tax rate. Taxable cigarette sales are down 29.7 percent since 2001, when the cigarette tax was 75 cents per pack of 20 cigarettes. Per capita sales have also declined to 54.6 packs in 2007, compared to 56.8 packs in 2006 and 78.2 packs in 2001. Exhibits 6 and 7 present taxable cigarette sales over the past thirty years along with per capita consumption estimates. At least some of the recent decline in the sales of taxable packs is likely due to smokers who have purchased cigarettes that are not taxed by Michigan. A common source for these purchases is through Internet sites that advertise “tax-free” cigarettes. The Michigan Tobacco Products Tax Act prohibits the possession of cigarettes within Michigan unless the package of cigarettes was subject to the Michigan tax on tobacco products. In response to the growth of Internet tobacco sales, the Department of Treasury has increased its enforcement activities related to on-line tobacco sales. The Department of Treasury obtained information from a number of Internet cigarette retailers on customer purchases shipped to Michigan. The Michigan customers were subsequently billed for the unpaid taxes due on their cigarette purchases. More information about enforcement of Michigan’s tobacco tax laws may be found at: http://www.michigan.gov/taxes/0,1607,7-238-43542_43548--,00.html. The federal cigarette tax raised $7.3 billion in the year ending June 2007, down from $7.5 billion in the preceding year. The decrease in federal tax revenue reflects a 2.2 percent decline in national cigarette consumption, close to the average decline of 1.7 percent per year from 1980 to 2007.1 Higher fuel prices, in addition to increased state taxation, may have affected cigarette sales in 2007. 1

Orzechowski and Walker, The Tax Burden on Tobacco, vol.42.

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Exhibit 8 provides historical information on federal tax collections and national cigarette consumption. Forty-eight states have increased their cigarette tax rate since 1990. In 2008, Michigan had the 6th highest tax rate in the nation at $2.00 (tied with Alaska, Arizona, Connecticut, Hawaii, Maine, and Maryland). In all, 12 states representing 23.5 percent of the U.S. population have tax rates of $2.00 per pack or higher. Generally states with higher taxes have fewer cigarettes sold subject to the tax, although the relationship is imprecise. For example, Michigan has a relatively high cigarette tax but ranks 30th in the nation in taxable cigarette sales per capita. By comparison, California and Utah both rank much lower in both their cigarette tax rates and sales per capita. The decline in taxable sales of cigarettes over the past 10 years in Michigan mirrors a similar decline in taxable sales nationally. Exhibits 9 through 13 compare cigarette taxes, prices, and taxable cigarette sales across the U.S. Michigan’s tax on other tobacco products (OTP) has risen from 16 percent of the wholesale price from May 1994 to August 2002, to 32 percent of the price following the 2004 tax increase. The higher tax rate on OTP has contributed to increased tax revenues. While the tax rate on OTP has doubled in recent years, it remains significantly lower than the tax rate on cigarettes as a percentage of the price. Exhibit 14 compares the state tax rates on OTP, as well as providing recent data on tax collections and usage. Adults in Michigan are more likely to smoke cigarettes, on average, than adults in other states. The overall average prevalence in Michigan among adults was 21.2 percent in 2007, higher than the median value across the U.S. states of 19.8 percent. Men are more likely to smoke than women, both in Michigan and across the U.S. Exhibit 15 compares the overall prevalence of smoking and provides the distribution by gender for all fifty states. The decline in taxable cigarette sales in Michigan following the tax increases enacted in 2002 and 2004 suggests that cigarette smoking may also be declining. Recent survey data support that conclusion. Exhibit 16 compares the Michigan cigarette tax with the survey data on the prevalence of smoking among high school students and adults. Both groups have seen declines in the prevalence of smoking as the tax rate has risen. The decline has been larger among high school students, with the prevalence of smoking falling from 38.2 percent in 1997 to 17.0 percent in 2005 and 18.0 percent in 2007. Much of the decline in youth smoking occurred prior to the 2002 tax increase, but the decline in Michigan has been larger than the decline in youth smoking nationally. The percentage of Michigan students who currently smoke cigarettes is below the national average, and the percentage of students who have ever tried cigarette smoking is very close to the national average. More reports on Michigan’s tobacco taxes are available on the Department of Treasury’s website at www.michigan.gov/treasury. Click on “Revenue, Economic & Budget Data” to bring up a list of tax reports prepared by the Office of Revenue and Tax Analysis. If you would like to download older tobacco reports, click on the “List of Archived Reports” at the bottom of the page. If you have questions on this report, please contact Scott Darragh at (517) 373-2697.

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Exhibit 1 Tobacco Tax Revenues (thousands)

Fiscal Year

Nominal Rate Tax (1) (Cents) Revenue

Total Tax Revenue

Revenue Per Penny of Tax

InflationAdjusted Revenue (2)

Tax as Percent of Total Taxes

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989

11 11 11/21 21 21 21 21 21 21/25 25

141,205 6,126,400 152,827 6,195,020 (3) 188,003 6,371,191 242,068 7,337,434 240,957 8,405,736 241,037 8,958,027 236,489 9,270,805 237,382 9,591,731 (3) 264,496 10,285,540 267,016 10,850,896

12,837 13,893 12,396 11,527 11,474 11,478 11,261 11,304 11,021 10,681

331,244 328,119 387,829 485,349 467,204 451,606 436,948 425,247 455,863 436,876

2.30 2.47 2.95 3.30 2.87 2.69 2.55 2.47 2.57 2.46

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

25 25 25 25 25/75 75 75 75 75 75

255,339 259,160 246,005 243,648 395,715 (3) 619,401 580,772 546,026 566,046 615,129

11,062,400 10,865,460 11,267,492 11,891,105 14,014,810 17,009,114 18,090,458 18,970,316 20,149,025 21,472,775

10,214 10,366 9,840 9,746 8,634 8,259 7,744 7,280 7,547 8,202

397,304 389,616 362,219 349,240 549,879 834,066 762,049 699,039 708,797 750,990

2.31 2.39 2.18 2.05 2.82 3.64 3.21 2.88 2.81 2.86

2000 2001 2002 2003 2004 2005 2006 2007

75 75 75/125 125 125/200 200 200 200

604,212 596,082 669,914 (3) 891,775 992,793 (3) 1,179,871 1,169,005 1,129,226

22,363,369 21,872,223 21,455,308 21,718,157 22,097,228 23,121,664 23,364,924 23,487,484

8,056 7,948 8,039 7,134 6,906 5,899 5,845 5,646

712,031 683,922 749,300 977,776 1,071,510 1,237,380 1,189,816 1,129,226

2.70 2.73 3.12 4.11 4.49 5.10 5.00 4.81

(1) After 1994 figures include tax from other tobacco products. (2) Adjusted for inflation to 2007 dollars. (3) Includes approximately $11 million collected from temporary inventory tax in 1982, $5 million in 1988, $22 million in 1994, $22 million in 2002, and $28 million in 2004. Sources: Michigan Department of Management and Budget and U.S. Bureau of Labor Statistics.

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Exhibit 2 Michigan Cigarette Tax Collections

$1,250 Real Revenues

Millions

$1,000 $750 $500

Nominal Revenues

$250 $0 1976

1980

1984

1988

1992

1996

2000

2004

Source: Michigan Department of Management and Budget.

Exhibit 3 Michigan Cigarette Tax Revenue as Share of Total State Tax Revenue

6.0%

Percentage

5.0% 4.8%

4.0% 3.0% 2.0% 1.0% 0.0% 1976

1980

1984

1988

1992

1996

Source: Michigan Department of Management and Budget.

4

2000

2004

Exhibit 4 Distribution of Tobacco Tax Revenue FY 2007

FY 2007 Revenue (thousands)

Distribution General Fund/General Purpose School Aid Fund Health and Safety Fund Healthy Michigan Fund Medicaid Benefit Trust Fund Wayne County - Indigent Care Total

Percent of Revenue

$225,389 $450,377 $26,620 $43,259 $377,482 $6,100

20.0% 39.9% 2.4% 3.8% 33.4% 0.5%

$1,129,226

100.0%

Source: Office of Revenue and Tax Analysis, Michigan Department of Treasury

Exhibit 5 Distribution of Tobacco Tax Revenue by Product Fiscal Years 2001 – 2007

Tax Rate Year 2001 2002 2003 (3) 2004 2005 2006 2007

Cigarette (1) $0.75 $0.75/$1.25 $1.25 $1.25/$2.00 $2.00 $2.00 $2.00

Tax Revenue (thousands)

OTP (2)

Cigarette

16% 16%/20% 20% 20%/32% 32% 32% 32%

$579,151 $650,880 $868,963 $964,193 $1,139,605 $1,131,153 $1,084,006

OTP $16,931 $19,034 $22,812 $28,600 $40,266 $37,852 $45,220

Total $596,082 $669,914 $891,775 $992,793 $1,179,871 $1,169,005 $1,129,226

Notes: (1) Tax rate is the tax per pack of 20 cigarettes. (2) OTP represents "Other Tobacco Products," which are taxed as a percentage of the wholesale price. (3) Total revenue and cigarette revenue for 2002 and 2004 includes revenue from the inventory tax. Source: Office of Revenue and Tax Analysis, Michigan Department of Treasury

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Exhibit 6 Cigarette Packs Sold Taxed Calculated Packs Sold Taxed (000s)

Calculated Per Capita Packs Sold Taxed

Year

Average Retail Price

Percentage Change

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989

0.62 0.68 0.88 0.97 1.01 1.06 1.11 1.22 1.33 1.44

3.3 9.7 29.4 10.2 4.1 5.0 4.7 9.9 9.0 8.3

1,296,648 1,403,370 1,302,866 1,164,348 1,159,004 1,159,389 1,137,513 1,141,809 1,098,387 1,078,853

0.6 8.2 -7.2 -10.6 -0.5 0.0 -1.9 0.4 -3.8 -1.8

140.0 152.4 142.9 128.7 128.1 127.7 124.6 124.3 119.1 116.6

0.6 8.9 -6.2 -10.0 -0.5 -0.3 -2.4 -0.3 -4.1 -2.1

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

1.45 1.77 1.85 1.63 2.24 2.29 2.34 2.43 2.61 3.34

0.7 22.1 4.5 -11.9 37.4 2.2 2.2 3.8 7.5 27.7

1,031,673 1,047,111 993,960 984,436 912,267 820,601 766,580 719,355 745,417 810,939

-4.4 1.5 -5.1 -1.0 -7.3 -10.0 -6.6 -6.2 3.6 8.8

110.8 111.5 105.0 103.3 95.2 84.9 78.7 73.5 75.9 82.2

-5.0 0.6 -5.8 -1.6 -7.9 -10.8 -7.3 -6.6 3.3 8.3

2000 2001 2002 2003 2004 2005 2006 2007

3.46 3.79 4.35 4.33 5.09 5.10 5.29 5.35

3.5 9.8 14.6 -0.3 17.4 0.3 3.8 1.1

794,464 782,589 791,075 705,293 680,957 578,480 574,189 550,257

-2.0 -1.5 1.1 -10.8 -3.5 -15.0 -0.7 -4.2

79.8 78.2 78.8 70.0 67.4 57.2 56.8 54.6

-2.9 -2.0 0.7 -11.1 -3.7 -15.1 -0.7 -3.9

Annual Average Change 1980 - 2007

8.3%

Percentage Change

-3.1%

Note: Average retail price data are from Orzechowski and Walker for November 1 of each year. Source: Office of Revenue and Tax Analysis, Michigan Department of Treasury. Population data are from Census Bureau.

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Percentage Change

-3.4%

Exhibit 7 Annual Packs Sold Taxed

1,500

Millions of Packs

1,200

900

600 550 300

0 1976

1980

1984

1988

1992

1996

2000

2004

Source: Office of Revenue and Tax Analysis, Michigan Department of Treasury.

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Exhibit 8 National Cigarette Tax Trends

Year

Federal Tax Rate Per Pack (Cents)

Federal Revenues (Millions) (1)

Consumption (Millions of Packs)

Percent Change in Consumption

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989

8.0 8.0 8.0 8.0/16.0 16.0 16.0 16.0 16.0 16.0 16.0

2,604.4 2,488.2 2,496.1 3,424.4 4,749.2 4,442.5 4,430.8 4,752.3 4,466.5 4,237.8

30,288.3 31,666.4 31,611.8 29,991.1 29,837.0 29,770.9 29,051.2 28,965.5 27,790.8 26,487.5

-1.5 4.6 -0.2 -5.1 -0.5 -0.2 -2.4 -0.3 -4.1 -4.7

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

16.0 16.0/20.0 20.0 20.0/24.0 24.0 24.0 24.0 24.0 24.0 24.0

4,069.8 4,754.6 5,043.0 5,528.0 5,599.5 5,716.8 5,679.1 5,743.4 5,559.2 5,193.1

25,436.5 25,376.5 25,215.7 24,730.1 23,350.0 23,818.0 23,660.0 23,929.2 23,163.4 21,637.9

-4.0 -0.2 -0.6 -1.9 -5.6 2.0 -0.7 1.1 -3.2 -6.6

2000 2001 2002 2003 2004 2005 2006 2007

24.0/34.0 34.0 39.0 39.0 39.0 39.0 39.0 39.0

6,230.3 7,080.5 8,036.9 7,798.5 7,702.6 7,566.6 7,480.0 7,307.4

21,325.0 21,250.0 21,310.0 20,225.0 19,790.0 19,370.0 19,159.8 18,737.1

-1.4 -0.4 0.3 -5.1 -2.2 -2.1 -1.1 -2.2

4.0%

-1.7%

(2)

(2) (2)

(2) (2)

Annual Average Change 1980 - 2007 (1) Based on year ending June 30. (2) Rate changed during year. Source: Orzechowski and Walker.

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Exhibit 9 State Cigarette Tax Rate Trends State Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virginia Washington West Virginia Wisconsin Wyoming U.S. Average Federal Tax

1980

Tax Rate (Cents) 1990

2008

Change, 1990 - 2008 Actual Percent

12.0 8.0 13.0 17.8 10.0 10.0 21.0 14.0 21.0 12.0 14.0 9.1 12.0 10.5 13.0 11.0 3.0 11.0 16.0 10.0 21.0 11.0 18.0 11.0 9.0 12.0 13.0 10.0 12.0 19.0 12.0 15.0 2.0 12.0 15.0 18.0 9.0 18.0 18.0 7.0 14.0 13.0 18.5 10.0 12.0 2.5 16.0 17.0 16.0 8.0 12.7

16.5 29.0 18.0 21.0 35.0 20.0 40.0 14.0 24.0 12.0 42.0 18.0 30.0 15.5 31.0 24.0 3.0 20.0 31.0 13.0 26.0 25.0 38.0 18.0 13.0 18.0 27.0 35.0 25.0 40.0 15.0 39.0 2.0 30.0 18.0 23.0 28.0 18.0 37.0 7.0 23.0 13.0 41.0 23.0 17.0 2.5 34.0 17.0 30.0 12.0 23.0

42.5 200.0 200.0 59.0 87.0 84.0 200.0 115.0 33.9 37.0 200.0 57.0 98.0 99.5 136.0 79.0 30.0 36.0 200.0 200.0 251.0 200.0 123.0 18.0 17.0 170.0 64.0 80.0 108.0 257.5 91.0 275.0 35.0 44.0 125.0 103.0 118.0 135.0 246.0 7.0 153.0 62.0 141.0 69.5 199.0 30.0 202.5 55.0 177.0 60.0 116.2

26.0 171.0 182.0 38.0 52.0 64.0 160.0 101.0 9.9 25.0 158.0 39.0 68.0 84.0 105.0 55.0 27.0 16.0 169.0 187.0 225.0 175.0 85.0 0.0 4.0 152.0 37.0 45.0 83.0 217.5 76.0 236.0 33.0 14.0 107.0 80.0 90.0 117.0 209.0 0.0 130.0 49.0 100.0 46.5 182.0 27.5 168.5 38.0 147.0 48.0 93.2

157.6 589.7 1,011.1 181.0 148.6 320.0 400.0 721.4 41.3 208.3 376.2 216.7 226.7 541.9 338.7 229.2 900.0 80.0 545.2 1,438.5 865.4 700.0 223.7 0.0 30.8 844.4 137.0 128.6 332.0 543.8 506.7 605.1 1,650.0 46.7 594.4 347.8 321.4 650.0 564.9 0.0 565.2 376.9 243.9 202.2 1,070.6 1,100.0 495.6 223.5 490.0 400.0 404.6

8.0

16.0

39.0

23.0

143.8

Sources: Orzechowski and Walker, Federation of Tax Administrators, and Campaign for Tobacco-Free Kids. Tax rates for 2007 are those in effect on July 1.

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Exhibit 10 State Comparisons, 2007 Cigarette Tax State Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virginia Washington West Virginia Wisconsin Wyoming Average/Total

Tax Rate (1) (Cents)

Rank

42.5 200.0 200.0 59.0 87.0 84.0 200.0 115.0 33.9 37.0 200.0 57.0 98.0 99.5 136.0 79.0 30.0 36.0 200.0 200.0 251.0 200.0 123.0 18.0 17.0 170.0 64.0 80.0 108.0 257.5 91.0 275.0 35.0 44.0 125.0 103.0 118.0 135.0 246.0 7.0 153.0 62.0 141.0 69.5 199.0 30.0 202.5 55.0 177.0 60.0 116.2

41 6 6 37 29 30 6 23 45 42 6 38 27 26 18 32 46 43 6 6 3 6 21 48 49 15 34 31 24 2 28 1 44 40 20 25 22 19 4 50 16 35 17 33 13 46 5 39 14 36

(1) Includes tax law changes effective on or before July 1, 2008. (2) For year ending June 30, 2007. Sources: Orzechowski and Walker and Federation of Tax Administrators.

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2007 Revenues (2) (Thousands) $156,821 63,850 354,888 127,394 1,007,354 204,048 264,020 88,006 428,877 224,123 88,772 48,960 611,785 358,376 124,275 116,017 179,100 133,781 154,737 271,026 418,449 1,111,163 408,644 46,500 99,969 84,580 67,967 130,840 138,574 766,474 61,629 936,457 239,668 21,228 972,741 205,250 242,178 1,021,357 118,851 27,554 43,185 129,671 1,024,383 58,225 60,815 174,548 418,814 110,537 300,945 25,632 $14,473,038

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Exhibit 12 Taxed Cigarette Consumption Trends (Millions) State Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virginia Washington West Virginia Wisconsin Wyoming Total

1997 Packs Sold Taxed 448.2 49.6 286.2 272.9 1,716.1 310.7 248.4 90.0 1,339.6 739.9 58.1 89.2 942.6 790.2 267.7 229.3 725.6 458.3 125.7 368.7 406.1 724.9 391.6 288.6 646.6 78.1 141.3 153.2 202.6 614.8 105.9 1,173.6 919.5 49.9 1,213.8 369.0 286.7 1,120.1 89.1 460.6 65.0 632.8 1,389.2 114.0 57.5 721.2 307.5 209.1 474.7 52.3 23,016.3

2007 Packs Sold Taxed 369.0 35.5 231.1 220.4 1,157.9 242.9 176.9 158.1 1,265.1 605.5 56.1 85.9 624.2 645.7 227.6 146.6 597.0 371.6 77.4 271.0 277.1 555.6 273.7 258.3 588.1 49.7 106.2 163.5 173.1 298.5 67.7 622.7 693.7 48.2 778.2 307.2 205.2 756.3 48.3 394.1 45.7 648.4 1,159.1 83.8 34.0 581.3 207.1 201.0 390.8 42.7 17,624.8

Source: Orzechowski and Walker. Figures correspond to years ending June 30.

12

Percent Change -17.7 -28.4 -19.3 -19.2 -32.5 -21.8 -28.8 75.7 -5.6 -18.2 -3.4 -3.7 -33.8 -18.3 -15.0 -36.1 -17.7 -18.9 -38.4 -26.5 -31.8 -23.4 -30.1 -10.5 -9.0 -36.4 -24.8 6.7 -14.6 -51.4 -36.1 -46.9 -24.6 -3.4 -35.9 -16.7 -28.4 -32.5 -45.8 -14.4 -29.7 2.5 -16.6 -26.5 -40.9 -19.4 -32.7 -3.9 -17.7 -18.4 -23.4

Exhibit 13 2007 Cigarette Prices and Sales State Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virginia Washington West Virginia Wisconsin Wyoming U.S. Average

2008 State Excise Tax $0.43 2.00 2.00 0.59 0.87 0.84 2.00 1.15 0.34 0.37 2.00 0.57 0.98 1.00 1.36 0.79 0.30 0.36 2.00 2.00 2.51 2.00 1.23 0.18 0.17 1.70 0.64 0.80 1.08 2.58 0.91 2.75 0.35 0.44 1.25 1.03 1.18 1.35 2.46 0.07 1.53 0.62 1.41 0.70 1.99 0.30 2.03 0.55 1.77 0.60 $1.16

Weighted Avg. (1) Retail Price $3.76 6.35 5.20 3.82 4.20 4.21 5.36 4.24 3.61 3.66 5.74 3.80 4.98 4.14 4.54 4.11 3.46 3.61 5.52 4.28 5.13 5.35 4.61 3.44 3.36 4.97 3.76 4.03 4.24 6.09 4.06 5.47 3.45 3.54 4.41 4.10 4.29 4.40 5.78 3.26 4.39 3.74 4.46 3.89 5.10 3.60 5.51 3.57 4.09 3.74 $4.20

(1) As of November 1, 2007, and includes generic brands. (2) Per capita sales are as of June 30, 2007. Source: Orzechowski and Walker.

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Rank by Price 37 1 10 34 26 25 8 24 42 40 4 35 13 27 16 28 46 41 5 22 11 9 15 48 49 14 36 32 23 2 31 7 47 45 18 29 21 19 3 50 20 39 17 33 12 43 6 44 30 38

Per Capita Sales (2) (Packs) 80.2 52.9 37.5 78.4 31.8 51.1 50.5 185.2 69.9 64.7 43.7 58.6 48.6 102.3 76.3 53.1 141.9 86.7 58.5 48.3 43.0 55.0 53.0 88.8 100.6 52.6 60.1 65.5 131.6 34.2 34.6 32.3 78.3 75.9 67.8 85.8 55.5 60.8 45.3 91.2 58.5 107.4 49.3 32.9 54.5 76.1 32.4 110.5 69.7 83.0 69.2

Rank by Per Capita Sales 13 34 44 14 50 36 37 1 19 23 42 26 39 6 16 32 2 10 27 40 43 30 33 9 7 35 25 22 3 46 45 49 15 18 21 11 29 24 41 8 27 5 38 47 31 17 48 4 20 12

Exhibit 14 Other Tobacco Products Tax Revenue, FY 2007

State Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virginia Washington West Virginia Wisconsin Wyoming Total/National

Net Collections (000's) $5,705.7 8,457.1 12,560.3 20,525.6 70,650.0 25,573.5 5,101.6 1,518.2 29,734.3 26,464.8 5,587.8 7,464.9 20,974.4 17,834.0 12,107.6 5,167.7 7,854.7 18,068.4 5,996.3 9,024.6 13,809.3 42,578.8 37,272.4 12,037.2 11,906.4 9,773.8 5,817.9 8,841.8 1,627.4 11,911.1 5,235.7 45,910.8 6,895.6 2,864.7 31,003.9 31,039.8 30,936.1 NA 2,500.1 5,318.1 2,662.9 8,244.2 76,639.1 7,429.6 3,077.4 14,928.0 21,450.0 4,764.1 17,515.2 2,829.5 $793,192.1

Percent of Tobacco Taxes From OTP 3.5 11.7 3.4 13.9 6.7 11.1 2.0 1.7 6.6 10.6 5.9 13.2 3.3 4.7 8.9 4.3 4.2 11.9 3.7 3.2 3.2 3.7 8.4 20.6 10.6 10.7 7.9 6.3 1.1 1.5 7.8 4.7 2.8 11.9 3.2 13.1 11.5 NA 2.1 16.2 5.8 6.0 7.0 11.3 4.8 7.9 4.9 4.3 5.5 10.3 5.6

Smokeless Tobacco Tax Rate 1.5 cents/oz. (1) 75.0 % 22.3 cents/oz. (1) 32.0 % 45.1 % 40.0 % 20.0 % 15.0 % 25.0 % 10.0 % 40.0 % 40.0 % 18.0 % 24.0 % 50.0 % 10.0 % 7.5 % 20.0 % 78.0 % 15.0 % 90.0 % 32.0 % 70.0 % 15.0 % 10.0 % 50.0 % 20.0 % 30.0 % 19.0 % 30.0 % 25.0 % 37.0 % 10.0 % 16 cents/oz. (1) 17.0 % 60.0 % 65.0 % NA 40.0 % 5.0 % 35.0 % 6.6 % 40.0 % 35.0 % 41.0 % 10.0 % 75.0 % 7.0 % 50.0 % 20.0 %

Smokeless Tobacco Use % of Men % of Women Over 18 Over 18 7.8 0.9 5.3 0.5 2.1 0.1 8.4 0.6 1.0 0.0 3.8 0.1 1.1 0.0 1.2 0.1 1.5 0.1 4.8 0.9 0.6 0.0 5.8 0.1 2.1 0.1 3.0 0.0 4.0 0.0 7.8 0.2 7.9 0.0 4.0 0.2 2.0 0.1 1.1 0.0 0.6 0.0 2.3 0.0 4.7 0.1 10.1 0.8 5.1 0.2 10.3 0.2 7.1 0.2 2.3 0.2 0.6 0.0 0.8 0.0 3.7 0.1 1.1 0.1 4.2 1.0 6.5 0.2 4.9 0.0 6.9 0.2 4.3 0.2 4.4 0.1 0.5 0.0 3.7 0.5 6.5 0.4 7.0 0.5 4.6 0.2 2.4 0.1 3.6 0.0 2.7 0.1 4.3 0.0 11.4 0.6 4.3 0.1 11.8 0.3 4.1 0.1

(1) When tax rates differ by type, the rate for chewing tobacco is shown. Rates effective January 1, 2008. Sources: Orzechowski & Walker. Usage rates are from the Centers for Disease Control and Prevention.

14

Exhibit 15 Percentage of Adults Currently Smoking Cigarettes, 2007 State Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virginia Washington West Virginia Wisconsin Wyoming Median for U.S. States

Overall 22.5 22.2 19.8 22.4 14.3 18.7 15.5 19.0 19.3 19.3 17.0 19.2 20.2 24.1 19.8 17.9 28.3 22.6 20.1 17.1 16.4 21.2 16.5 24.0 24.6 19.5 19.9 21.5 19.4 17.2 20.8 18.9 22.9 21.0 23.1 25.8 16.9 20.9 17.0 21.9 19.8 24.3 19.4 11.7 17.6 18.6 16.8 27.0 19.6 22.1 19.8

Rank 11 13 24 12 49 36 48 34 31 31 42 33 21 6 24 38 1 10 22 41 47 17 46 7 4 28 23 16 29 40 20 35 9 18 8 3 44 19 42 15 24 5 29 50 39 37 45 2 27 14

Men 25.7 24.6 23.4 24.8 18.1 19.7 16.6 17.6 21.3 21.2 19.8 20.9 22.1 25.9 21.4 18.7 28.8 26.4 21.0 18.4 17.4 23.5 18.3 27.8 26.0 19.8 23.2 23.4 20.2 19.4 23.6 21.6 25.3 22.2 24.2 28.0 18.9 20.7 17.8 25.3 20.1 25.7 22.0 15.5 19.5 20.3 18.0 28.6 19.6 22.8 21.4

Source: Behavioral Risk Factor Surveillance System reported by Centers for Disease Control.

15

Women 19.7 19.7 16.3 20.2 10.6 17.7 14.5 20.3 17.5 17.5 14.3 17.4 18.4 22.4 18.3 17.1 27.8 19.1 19.3 16.0 15.5 19.0 14.7 20.5 23.3 19.3 16.8 19.6 18.6 15.2 18.1 16.5 20.7 19.8 22.1 23.8 14.9 21.1 16.3 18.8 19.5 22.9 16.9 8.0 15.9 16.9 15.7 25.5 19.5 21.4 18.5

Exhibit 16 Prevalence of Cigarette Smoking and the Tax Rate on Cigarettes

Youth Prevalence

200

35.0

175

Adult Prevalence

30.0

150

25.0

125

20.0

Michigan Tax Rate (End of Year)

100

15.0

75

10.0

50

5.0

25

0.0 1988

0 1990

1992

1994

Behavioral Risk Factor Survey

1996

1998

2000

2002

2004

Youth Risk Behavior Survey

16

Tax Rate per Pack (Cents)

Smoking Prevalence (Percent)

40.0

2006 Tax Rate