Cigarette Taxes

Impact on Smoking Rates

The potential benefit of raising cigarette taxes is enormous. Higher taxes make cigarettes more expensive, which deters kids from starting to smoke and motivates adults to quit. The revenue from cigarette taxes should be used to fund comprehensive tobacco prevention programs, which lead to decreased health care costs in the future.

States that take positive action now to curb smoking will see their health-related costs gradually decline as prevention and cessation programs reduce tobacco use and tobaccorelated disease. The CDC estimates that each pack of cigarettes sold in the United States costs the country $7.18 in medical care costs and lost productivity.⁴¹

A major increase in the taxes on cigarettes will rapidly and significantly reduce the number of children who start smoking and encourage many adults to quit. Studies have shown that a 10 percent increase in the price of cigarettes reduces consumption by seven percent for youth and consumption by four percent for adults.⁴²

In New York City, a significant increase in the cigarette tax (a combined city and state tax of $3.00 per pack), along with a strong smokefree air law, led to the most significant drop in smoking ever recorded in the city. In New York City, the benefits of a high tax, smoking cessation programs, and a comprehensive smokefree air law led to a total of 180,000 fewer smokers in 2003 and 2004, representing a 15 percent decline over two years.⁴³ Fewer New Yorkers are smoking today than at any point in the last 50 years. The number of people considered to be heavy smokers (people who smoke 11 or more cigarettes per day) dropped 28.8 percent.⁴⁴

Studies also show that minority, younger, and lower-income populations are more likely to reduce or quit smoking in response to a price increase.⁴⁵ For example, from 2002 to 2004 in New York City, the smoking rate declined by 40.5 percent among young women age 18-24 years, and 21.4 percent among Hispanics.⁴⁶

During 2003 and 2004, a total of 180,000 people quit smoking in New York City.

2005 Highlights

Twelve states raised their cigarette taxes in 2005, increasing the average state cigarette tax by $0.08 to $0.92 per pack. Nineteen states, the District of Columbia, and Puerto Rico are at a $1.00 or higher and five states—Maine, Michigan, New Jersey, Rhode Island and Washington—are at or above $2.00 per pack.ⁱⁱ Kentucky raised its tax for the first time in 35 years and no longer has the lowest tax in the nation. In an historic move, North Carolina also raised its tax by $0.25 to $0.30 per pack. South Carolina now has the dubious distinction of having the lowest cigarette tax in the nation.

This report finds that 14 states received an F in cigarette taxes. To make matters worse, too many states that have increased their cigarette tax have failed to dedicate any of the funding to tobacco prevention programs.

Looking Ahead

More and more states are realizing the positive benefits of raising cigarette excise taxes. If the current trend continues, the American Lung Association predicts that the average state cigarette tax will exceed $1.00 by the end of 2006.

ii States with cigarette excise taxes at or over $1.00: Alaska, Arizona, Connecticut, District of Columbia, Hawaii, Maine, Maryland, Massachusetts, Michigan, Minnesota, Montana, New Jersey, New York, Ohio, Oklahoma, Oregon, Pennsylvania, Puerto Rico, Rhode Island, Vermont, and Washington.

Key Findings Continued...