2009 Trends: Tobacco Taxes

States Turn to Tobacco Taxes to Balance Budgets

As states faced record budget deficits, 14 states turned to cigarette taxes to increase revenue. That represented a marked increase over the number of states that had raised these taxes in 2008. Connecticut, Florida and Rhode Island each raised their cigarette taxes by $1.00, while Wisconsin (75 cents), Hawaii (60 cents), Arkansas (56 cents), Mississippi (50 cents), Delaware and New Hampshire (45 cents) also significantly increased cigarette taxes. This brings the state cigarette tax average to $1.34 a pack, up 15 cents since January 1, 2009. Rhode Island now has the highest cigarette tax in the nation ($3.46 per pack). South Carolina, sadly, maintains its status as the state with the lowest tax (7 cents per pack).

A troubling trend has emerged. Tobacco taxes are a proven and effective way to raise revenue for states, as well as to reduce the number of adults and youth who smoke. However, instead of using some of the revenue to help smokers quit, states are often simultaneously cutting funding for tobacco prevention and cessation programs (see below). Wisconsin, which passed a comprehensive smokefree law and increased its cigarette tax by 75 cents in 2009, also slashed funding by more than half for its tobacco prevention and cessation programs. This is particularly hard on low-income smokers who are more likely to want to quit after large tobacco tax increases are imposed, but who lack the means to pay for cessation medications.

Fourteen states11 now have cigarette taxes totaling $2.00 or more per pack. Eight states—Alabama, Georgia, Louisiana, Missouri, North Carolina, North Dakota, South Carolina and Virginia—continue to miss out on the public health and revenue-generating benefits of higher cigarette taxes by keeping their taxes below 50 cents per pack.

As states increase their cigarette taxes, they should also raise taxes by corresponding amounts for other tobacco products—including "roll-your-own," little cigars and smokeless tobacco. This will not only increase state revenues, it will also have a positive impact on smoking rates. For those smokers who are inclined to quit, it will discourage switching to a cheaper tobacco product. In Ohio, for example, tobacco control advocates led by the American Lung Association in Ohio have launched a campaign to tax other tobacco products at the same rate as cigarettes. If the tax increase is passed, it is estimated that an additional $50 million a year would be raised for the state's tobacco control program.

 

11 States with cigarette tax rates over $2.00 per pack: Alaska, Arizona, Connecticut, District of Columbia, Hawaii, Maine, Maryland, Massachusetts, Michigan, New Jersey, New York, Rhode Island, Vermont, Washington and Wisconsin.