NCPA - National Center for Policy Analysis

No Health Benefit from Cigarette Tax Hikes

January 5, 2015

The federal cigarette tax currently costs $1.01 per pack, but President Obama's 2015 proposed budget called for a $0.94 increase in federal cigarette taxes. While such a tax may increase revenue, it does not decrease smoking, argues Jason Russell of the Washington Examiner.  Why? At this point, cigarettes are so heavily taxed that an increase in taxes are unlikely to persuade addicted smokers to kick the habit.

Thanks to taxes, cigarettes are expensive -- on average, 42 percent of the cost of a pack of cigarettes are due to taxes. As a result, current smokers -- already willing to shell out a significant sum for cigarettes -- are unlikely to be deterred by further taxes. New research from the University of Illinois at Chicago indicates that a $1 increase in cigarette taxes would cut smoking by less than 1 percent.

Cigarette taxes are also regressive, as low-income Americans contribute a much greater percentage of their household income towards cigarettes than do higher income Americans:

  • Smokers earning less than $30,000 annually spent 14.2 percent of their income on cigarettes from 2010 to 2011, while smokers earning between $30,000 and $59,999 spent 4.3 percent of their income on cigarettes. Smokers earning above $60,000 spent just 2 percent of their income on cigarettes.
  • Increasing federal cigarette taxes by $1 would cost a smoker earning between $20,000 and $25,000 close to $450 annually.

This reality, says Russell, suggests "that further cigarette tax increases would take income from the poor with little, if any, public health benefit."

The states with the five highest cigarette taxes are New York ($4.35), Massachusetts ($3.51), Rhode Island ($3.50), Connecticut ($3.40) and Hawaii ($3.20).

Source: Jason Russell, "Regressive cigarette tax hikes hardly improve health," Washington Examiner, December 26, 2014.


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