[' ', ' ', 'Tobacco', 'Monitor', '~', '4', '3', 'ao', 'A', '3-3.5$', 'decline', 'in', 'consumption', 'for', 'the', 'year', 'in', 'the', 'face', 'of', 'a', 'weighted', 'average', 'full', 'year', 'price', 'increase', 'at', 'the', 'retail', 'level', 'of', 'about', '21%', 'would', 'indicate', 'very', 'low', 'price', 'elasticity', 'of', 'demand', '--', 'about', '-0.15.', 'The', 'cigarette', 'manufacturers,', 'however,', 'inelude', 'free', 'samplea', 'and', 'two-for-one', 'packs', 'in', 'their', 'reports', 'of', 'taxable', 'shipments.', 'The', 'level', 'of', 'those', 'promotional', 'activities', 'in', '1983', 'was', 'significantly', 'greater', 'than', 'in', 'prior', 'years,', 'resulting', 'in', 'an', 'understatement', 'of', 'the', 'decline', 'in', 'actual', 'consumption.', 'Extensive', 'couponing', 'also', 'reduced', 'the', 'impact', 'of', 'higher', 'manufacturers', '*', 'prices', 'and', 'the', 'FET', 'on', 'consumption.', 'We', 'do', 'not', 'have', 'a', 'good', 'way', 'of', 'estimating', 'the', 'magnitude', 'of', 'give-', 'aways', 'in', '1983,', 'but', '1f', 'we', 'assume', 'that', 'the', 'actual', 'price', 'elasticity', 'of', 'demand', 'for', 'cigarettes', '1s', '-0.25,', 'somewhat', 'lower', 'than', 'most', 'academic', 'estimates,', 'giveaways', 'might', 'have', 'boosted', 'industry', 'wolume', 'by', 'about', '1%', 'last', 'year.', ' ', 'In', '198%,', 'we', 'expect', 'the', 'full', 'year', 'effect', 'of', 'manufacturers’', 'price', 'increases', 'in', 'j', 'July', 'and', 'December', '1983,', 'as', 'well', 'as', 'a', 'reduction', 'in', 'promotional', 'giveaways,', 'to', 'cause', 'a', 'R', '“further', 'drop', 'in', 'consumption.', 'The', 'primary', 'contributing', 'factor', 'to', 'the', 'decline,', 'prof', 'however,', 'will', 'be', 'the', 'continuation', 'of', 'governmental', 'and', 'social', 'pressure', 'against', 'hensiad', 'smoking.', 'For', 'the', 'full', 'year,', 'we', 'project', 'a', '1%', 'decline', 'in', 'actual', 'consumption,', 'or', 'about', '~', ')', '&', '2%', 'drop', 'in', 'per', 'capita', 'consumption.', 'Although,', 'we,', 'believe', 'that', 'consumers’', 'price', 'sensitivity', 'may', 'be', 'lower', 'than', 'other', 'Mag®', 'observers', 'suggaat,', 'it', 'would', 'be', 'difficult', 'to', 'argue', 'that', 'price', 'and', 'tax', 'increases', 'do', 'fpemezd', 'not', 'have', 'angi.negative', 'effect', 'on', 'consumption.', 'In', '1983,', '13°', 'states', 'raised', 'theie', '“eigarette', 'ex', 'fyi', 'LaXeS', '(Table', '12).', 'For', 'the', 'last', '20', 'years,', 'state', 'cigarette', 'tax', 'ma', '-Peceipts', 'havé', 'grown', 'at', '6.7%', 'compounded', 'annually.', 'Over', 'the', 'same', 'period', 'of', 'time,', 'otal', 'cigarette“consumption', 'grew', 'by', '0.7%', 'annually,', 'indicating', 'that', 'the', 'states-', 'nereame®', 'theic.~ake', 'from', 'cigarettes', 'by', '6%', 'a', 'year', 'on', '&', 'unit', 'basis.', 'Because', 'ered', 'dutgehary', 'pressures', 'at', 'the', 'state', 'level', 'have', 'eased', 'in', 'the', 'last', 'year,', 'we', 'dq', 'not', 'expect', 'as', 'Srequent', 'increases', 'in', 'state', 'excises', 'this', 'year', 'and', 'next,', 'but', 'it', 'is', 'reasonable', 'to', 'pargeneg', 'expec', 'stategetazes', 'to', 'increase', 'at', 'least', 'in', 'line', 'with', 'inflation', 'on', 'a', 'long', 'tera', 'eo', 'basis.', 'é', 'The', '<0', 'situation', 'is', 'very', 'different', 'from', 'that', 'at', 'the', 'state', 'level.', 'Aa', 'q', 'pevery', 'interesamkapbserver', 'of', 'the', 'cigarette', 'industry', 'knows,', 'the', 'January', '1983', 'doubling', 'paces,', '   ', 'As', 'currently', 'written,', 'the', 'jerovision', 'that', 'the', 'tax', 'will', 'revert', 'to', '$0.08', 'a', 'pack', 'on', 'October', '1,', '‘Ways', '&', 'Means', 'Committee', 'recently', 'voted', 'to', 'peg', 'the', 'FET', 'at', '$0.12', 'a', 'pret', 'pack', 'as', 'of', 'October', '1,', '1985,', 'construing', 'that', 'as', 'a', 'revenue', 'enhancement.', 'Not', 'only', 'is', 'it', 'unlikely', 'that', 'this', 'roliback', 'will', 'actually', 'be', 'implemented,', 'but', 'we', 'think', 'there', 'is', 'a', 'sim', 'possibility', 'of', 'additional', 'increases', 'in', 'the', 'FET.', 'The', 'federal', 'budget', 'deficit', 'remains', 'the', 'largest', 'political', 'and', 'economic', 'problem', 'facing', 'the', 'country;', 'although', 'any', 'Seng', 'Pesolution', 'of', 'the', 'issue', 'is', 'very', 'unlikely', 'prior', 'to', 'the', '1984', 'elections,', 'we', 'believe', 'that', 'the', 'tobacco', 'industry', 'may', 'be', 'a', 'politically', 'expedient,', 'albeit', 'minor', 'part', 'of', 'a', '¢', 'program', 'to', 'reduce', 'the', 'federal', 'deficit.', 'It', 'is', 'interesting', 'that', 'a', 'recent', 'poll', 'for', 'a', 'Magazine', 'found', 'about', '90%', 'of', 'voters', 'view', 'the', 'federal', 'deficits', 'as', 'a', 'serious', 'economic', 'problem.', 'To', 'reduce', 'the', 'deficits,', '77%', 'of', 'the', 'voters', 'said', 'they', 'would', 'be', 'willing', 'to', 'increase', 'taxes', 'on', 'tobacco,', 'and', 'only', '18%', 'said', 'they', 'would', 'not', 'be', 'willing', 'to', 'bot', 'ny', 'Those', 'were', 'much', 'higher', 'favorable', 'responses', 'than', 'for', 'any', 'other', 'possible', 'solutions:', 'L259', '26205', ' ', ' ', '  ', '—', 'Cm', 'Om', 'w', 'fad']