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Model predicting effects of S.1415 (McCain) McCain S.1415: Real Payments & Penalties (billions) total = $473 Assumptions: TCRTF & Liscensing Fees (billions) total= $7 Price Elasticity of Total Demand= -0.40 Look Back Penalties Not Deductible Price Elasticity of Teen Prevalence= -0.60 First Six Payments are not Volume-Adjusted Annual Effect of Non-price Provisions on Teen Prevalence= -0.65% Base Case Rate at which cost increases are passed through via price incre 100% Predicted Real Real Real Real Volume- Real Price Real Price Price Predicted Predicted Target Real Adjusted Price Increase Price Increase Increase Total Total Change Change Look Real Net Settlement Increase Due to Increase Due to Due to Real Real Domestic in Teen in Teen Back After-tax Payments due to Increased Due to Non- TCRTF & Price Retail Consumption Prev. Prev. Penalties Profit Year ($billions) Payments Fed. Tax Look Back Deductibility Liscense Fee Increase Price (billion packs) (percent) (percent) ($billions) ($billions) Current $0.00 $1.95 23.0 $4.5 1999 $10.0 $0.48 $0.00 $0.00 $0.00 $0.12 $0.60 $2.55 20.7 -16.2 0 $0.0 $4.6 2000 $14.4 $0.73 $0.10 $0.00 $0.00 $0.12 $0.95 $2.90 19.5 -23.0 0 $0.0 $4.4 2001 $15.4 $0.80 $0.09 $0.00 $0.00 $0.12 $1.01 $2.96 19.3 -24.4 -15 $0.0 $4.3 2002 $17.7 $0.94 $0.14 $0.00 $0.00 $0.12 $1.20 $3.15 18.7 -27.7 -15 $0.0 $4.2 2003 $21.0 $1.15 $0.14 $0.00 $0.00 $0.12 $1.41 $3.36 18.1 -30.9 -30 $0.0 $4.0 2004 $23.6 $1.33 $0.14 $0.00 $0.00 $0.12 $1.59 $3.54 17.6 -33.4 -30 $0.0 $3.9 2005 $16.8 $0.91 $0.14 $0.00 $0.00 $0.11 $1.16 $3.11 18.4 -28.5 -50 $0.0 $4.2 2006 $16.7 $0.91 $0.14 $0.01 $0.00 $0.11 $1.17 $3.12 18.3 -29.1 -50 $0.1 $4.2 2007 $16.0 $0.91 $0.14 $0.20 $0.11 $0.11 $1.46 $3.41 17.6 -33.3 -50 $3.5 $4.0 2008 $16.0 $0.91 $0.14 $0.16 $0.09 $0.11 $1.40 $3.35 17.6 -33.0 -60 $2.8 $4.0 2009 $16.1 $0.91 $0.14 $0.16 $0.09 $0.04 $1.34 $3.29 17.6 -32.6 -60 $2.9 $4.0 2010 $15.8 $0.91 $0.14 $0.20 $0.11 $0.04 $1.39 $3.34 17.4 -33.7 -60 $3.5 $3.9 2011 $15.7 $0.91 $0.14 $0.20 $0.11 $0.03 $1.39 $3.34 17.3 -34.2 -60 $3.5 $3.9 2012 $15.7 $0.91 $0.14 $0.20 $0.11 $0.03 $1.39 $3.34 17.2 -34.6 -60 $3.5 $3.9 2013 $15.6 $0.91 $0.14 $0.20 $0.11 $0.03 $1.40 $3.35 17.1 -35.0 -60 $3.5 $3.9 2014 $15.5 $0.91 $0.14 $0.21 $0.11 $0.03 $1.40 $3.35 17.0 -35.5 -60 $3.5 $3.9 2015 $15.4 $0.91 $0.14 $0.21 $0.11 $0.03 $1.40 $3.35 16.9 -35.9 -60 $3.5 $3.8 2016 $15.3 $0.91 $0.14 $0.21 $0.11 $0.03 $1.40 $3.35 16.8 -36.3 -60 $3.5 $3.8 2017 $15.2 $0.91 $0.14 $0.21 $0.11 $0.03 $1.40 $3.35 16.7 -36.8 -60 $3.5 $3.8 2018 $15.1 $0.91 $0.14 $0.21 $0.11 $0.03 $1.40 $3.35 16.6 -37.2 -60 $3.5 $3.8 2019 $15.0 $0.91 $0.14 $0.21 $0.11 $0.03 $1.40 $3.35 16.5 -37.6 -60 $3.5 $3.7 2020 $14.9 $0.91 $0.14 $0.21 $0.12 $0.03 $1.40 $3.35 16.4 -38.0 -60 $3.5 $3.7 2021 $14.8 $0.91 $0.14 $0.22 $0.12 $0.03 $1.41 $3.36 16.3 -38.4 -60 $3.5 $3.7 2022 $14.7 $0.91 $0.14 $0.22 $0.12 $0.03 $1.41 $3.36 16.2 -38.8 -60 $3.5 $3.7 2023 $14.6 $0.91 $0.14 $0.22 $0.12 $0.03 $1.41 $3.36 16.1 -39.3 -60 $3.5 $3.6 2024 $14.5 $0.91 $0.14 $0.22 $0.12 $0.02 $1.41 $3.36 16.0 -39.7 -60 $3.5 $3.6 Total $411.4 $61.8 $102.5 % Change 72% -31% Real= 1997 dollars MCCAIN2.WB2, 4/20/98, page 1