NCPA - National Center for Policy Analysis

Taxing Tobacco by Risk

January 13, 2011

Cigarette taxes are meant to raise revenue and reduce smoking rates, yet these taxes are arbitrary and vary widely from state to state, says Pamela Villarreal, a senior policy analyst with the National Center for Policy Analysis. 

  • The average state tax per pack of cigarettes is $1.45, but ranges from $0.17 per pack in Missouri to $4.35 per pack in New York.
  • Furthermore, products that have been shown to be less harmful than cigarettes, such as smokeless tobacco, are often taxed at near-equivalent or greater rates.

Harm reduction is an approach to public health intended as an alternative to the prohibition of certain potentially dangerous lifestyle choices. 

  • It recognizes that some individuals will continue to engage in behaviors that carry risks, and attempts to mitigate the risks associated with the behaviors themselves.
  • The goal of tobacco harm reduction is to steer users toward tobacco products with fewer health risks, such as smokeless tobacco, over higher-risk combustible products, such as cigarettes.
  • A number of published studies conclude that cigarettes and other combustible smoking products pose a far greater risk to human health than smokeless (noncombustible) tobacco.

This suggests that a tobacco harm reduction strategy would tax smokeless tobacco (using a 1.2 ounce can of snuff as the example) at about one-tenth as much as the tax on cigarettes.  On the other hand, if the rate of taxation is equal to or higher than cigarettes, the state is penalizing users who switch to a less risky product.  Only two states tax smokeless tobacco at or below this ratio (Pennsylvania and Alabama).  Six states tax smokeless tobacco at a rate that is greater than the tax on cigarettes, per unit.  Thus, in six states, tax levels actually encourage smokeless tobacco users to become smokers, says Villarreal.

States that wish to pursue a consistent and science-based tobacco harm reduction strategy should examine the way in which they tax tobacco products and the amount of tax levied on these products.  

Source: Pamela Villarreal, "Taxing Tobacco by Risk," National Center for Policy Analysis, January 13, 2011.

For text:


Browse more articles on Tax and Spending Issues