Cigarette Tax Facts, Including Intl, Historical, and State Tables

Proposed Cig Tax Increase is Too Small to be Effective, and is Also Unfair

The proposed increase in federal cigarette excise taxes of only 55 cents a pack is far too small to have the desired effect of significantly reducing smoking by children.

It would also leave the U.S. with the lowest known effective tax burden in the world, and establish a tax which is dreadfully low even by U.S. historic standards. [see Tables I and II below]

Two major expert bodies recently studied how cigarette taxes affect consumption and starting behaviors of children. Both unanimously recommended an increase in cigarette taxes of $2.00 a pack in order to achieve any significant reductions.

The prestigious and impartial National Academy of Sciences has issued a major report. It shows that increased taxation of tobacco is the most effective way to deter kids from becoming addicts. Indeed, the Academy found that tax increases were far more effective than limitations on cigarette advertising and promotion, or antismoking campaigns,in reducing teen consumption. To achieve these goals, they recommended a tax increase of at least $2 a pack, noting that small increases are likely to have only a limited effect.  Click on  Natl Academy of Sciences Backs Cig Tax - Read Report [01/14/98]

The Advisory Committee on Tobacco Policy and Public Health, also known as the Koop-Kessler Committee, was composed of representatives from all of the major U.S. organizations concerned about smoking. It also unanimously concluded that an increase in the price of cigarettes of $2 a pack was necessary to achieve significant reductions in cigarette consumption by teenagers. Final Report of The Advisory Committee on Tobacco Policy and Public Health -- Action on Smoking and Health (ASH)

In most countries around the world, more than 70% of the price of cigarettes is made up of taxes, and in only a few is the percentage below 50%. But in the U.S., less than 40% of the price smokers pay is the tax. Even with an increase of 55 cents a pack, taxes would make up far less than 60 percent of the U.S. total price, still lower than virtually any other country. [SEE TABLE I  BELOW]

Back in the 1950's, before most people had any idea how dangerous cigarettes were, the federal excise tax made up 30-35% of their price. Today, when we know that smoking kills more than 400,000 smokers each year, the federal tax makes up less than 20% of the price. [SEE TABLE II BELOW]

This is manifestly unfair, because the majority of the enormous costs of smoking then must be borne primarily by nonsmokers who pay the costs in higher federal taxes (to cover smoking-related costs to Medicaid, Medicare, veterans' benefits, etc.) state taxes (various medical and welfare programs), health insurance premiums, and inflated costs for products and services to cover business-paid costs of health insurance, time lost from work, disability, etc.

Testimony to the U.S. Senate estimated that the costs of smoking to the American economy are approximately $130 billion dollars a year. Yet federal, state, and municipal excise taxes on cigarettes for the fiscal year ending June 30, 1996 were only about $13 billion [The Tax Burden of Tobacco, Vol. 27, 1996] -- only about one tenth the cost!

The tobacco industry also tries to suggest that raising cigarette taxes is unfair to the poor, and/or that cigarette taxes are necessarily regressive. However, neither is true for several reasons.

First, the great majority of the poor -- and the majority of poor families -- do not use tobacco, although most poor households do purchase alcoholic beverages.

Therefore the majority of the poor -- and those who quit -- will not pay any of the increased tax on tobacco products, although they would reap the many benefits when higher cigarette taxes discourage smoking by others.

Primary among these would be the huge saving in income and other taxes now being used to pay for additional and unnecessary medical care under Medicaid, Medicare, Veterans' benefits and other welfare programs caused by smoking, as well as substantial savings in the expenses of medical insurance.

In addition, since the financial incentive to quit is strongest among those with the least income -- who are also less likely to appreciate the dangers from abstract warnings and are least responsive to social pressures to quit þ the poor would also benefit more directly in many ways.

The most direct beneficiaries would be those who are dissuaded from smoking by the higher tax. Many of those who will avoid death and disability as a result of quitting will be the poor smokers, the majority of whom already want to quit but require an additional incentive.

Since many of the more than American adults estimated to die each year from breathing tobacco smoke are the spouses of smokers, and the highest percentages of smokers are in the lowest income brackets, primarily beneficiaries of a higher cigarette tax will be the spouses of the current smokers who are persuaded to quit by a higher tax.

Others who as a result will literally breathe easier and live longer will be the children of the poor smokers who quit, and their friends and neighbors who are also likely to be poor.

Since smoking is also the major cause of residential fire deaths, the families of poor smokers and those who live in the same homes or apartment buildings are likely to benefit most from the cessation effects of a higher cigarette tax.

Finally, the Congressional Budget Office concluded in a study of excise taxes that "excise taxes may not burden lower-income families as much as they appear to. . . . Measured as a percentage of total family expenditures, excise taxes are nearly the same for low-, middle-, and high-income families."

To see which U.S. Senators voted in favor of a $1.50 cigarette tax increase in 1998,  click here

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TABLE I

CIGARETTE TAX BURDEN IN COUNTRIES ROUND THE WORLD

COUNTRY          TAX     PRICE     %TAX
Denmark          $4.02   $4.75     85%
Ireland          $4.16   $4.94     84%
United Kingdom   $4.30   $5.27     82%
Portugal         $1.43   $1.77     81%
Finland          $3.48   $4.54     77%
France           $2.61   $3.47     75%
Spain            $0.81   $1.08     75%
Brazil           $1.06   $1.43     74%
Belgium          $2.39   $3.23     74%
Austria          $2.11   $2.84     74%
Norway           $5.23   $7.05     74%
Greece           $1.33   $1.82     73%
Netherlands      $1.94   $2.66     73%
Canada (highest) $2.97   $4.09     73%
Italy            $1.59   $2.17     73%
Germany          $2.28   $3.18     72%
Sweden           $3.13   $4.47     70%
New Zealand      $2.76   $4.17     66%
Canada (average) $1.97   $3.00     66%
Iceland          $2.63   $4.07     65%
Australia        $2.92   $4.50     65%
Thailand         $0.89   $1.58     56%
Canada (lowest)  $1.12   $2.02     55%
Singapore        $1.87   $3.72     50%
Hong Kong        $1.76   $3.62     49%
U.S. (highest)   $1.24   $2.65     47%
South Africa     $0.47   $1.04     45%
Taiwan           $0.62   $1.45     43%
U.S. (Average)   $0.66   $1.90     35%
U.S. (lowest)    $0.34   $1.60     21%

Tax = portion of average retail selling price that comprises all applicable taxes
and other fees imposed on product

%Tax = tax as percentage of total cigarette price; i.e., tax/price

Price for a package of 20 of the most popular price category
Source: Sweanor, Smoking and Health Action Foundation, 6/6/97

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HISTORICAL FEDERAL TAX BURDEN ON CIGARETTES [> = CENTS]

YEAR     PRICE   TAX/PK        %TAX

1955     22.7       8         35%
1956     23.2       8         34%
1957     23.8       8         34%
1958     25.0       8         32%
1959     25.6       8         31%
1960     26.1       8         31%
1961     26.1       8         31%
1962     26.9       8         30%
1963     26.8       8         30%
1964     27.9       8         29%
1965     28.2       8         28%
1966     30.0       8         27%
1967     30.5       8         26%
1968     32.3       8         25%
1969     32.8       8         24%
1970     37.1       8         22%
1971     38.9       8         21%
1972     40.0       8         20%
1973     40.3       8         20%
1974     41.8       8         19%
1975     44.5       8         18%
1976     47.9       8         17%
1977     49.2       8         16%
1978     54.3       8         15%
1979     56.8       8         14%
1980     60.0       8         13%
1981     63.0       8         13%
1982     69.7       8         11%
1983     81.9      16         20%
1984     94.7      16         17%
1985     97.8      16         16%
1986    104.5      16         15%
1987    110.0      16         15%
1988    122.2      16         13%
1989    127.5      16         13%
1990    144.1      16         11%
1991    153.3      16         10%
1992    173.5      20         11%
1993    183.7      24         13%
1994    169.3      24         14%
1995    175.8      24         13%
1996    179.6      24         13%
1997    190.0      24         12%

%Tax = fed excise tax as percentage of total cigarette price

Source: The Tax Burden of Tobacco, Vol. 27, 1996.
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STATE TAXES ON CIGARETTES

All 50 states impose cigarette taxes, ranging from 2.5 cents a pack in Virginia to $ 1 a pack 
in Alaska. Here's what the states impose on a pack as of August 2004.

STATE TAX RATE PER PACK
State Tax Rate
(per pack of 20)
Alabama $0.425
Alaska $1.000
Arizona $1.180
Arkansas $0.590
California $0.870
Colorado $0.200
Connecticut $1.510
Delaware $0.550
District of Columbia $1.000
Florida $0.339
Georgia $0.370
Hawaii $1.400
Idaho $0.570
Illinois $0.980
Indiana $0.555
Iowa $0.360
Kansas $0.790
Kentucky $0.030
Louisiana $0.360
Maine $1.000
Maryland $1.000
Massachusetts $1.510
Michigan $2.000
Minnesota $0.480
Mississippi $0.180
Missouri $0.170
Montana $0.700
Nebraska $0.640
Nevada $0.800
New Hampshire $0.520
New Jersey $2.400
New Mexico $0.910
New York $1.500
North Carolina $0.050
North Dakota $0.440
Ohio $0.550
Oklahoma $0.230
Oregon $1.180
Pennsylvania $1.350
Rhode Island $2.460
South Carolina $0.070
South Dakota $0.530
Tennessee $0.200
Texas $0.410
Utah $0.695
Vermont $1.190
Virginia $0.025
Washington $1.425
West Virginia $0.550
Wisconsin $0.770
Wyoming $0.600

*State Cigarette Excise Tax 2004 American Lung Association [8/23/04]
  STATE CIGARETTE EXCISE TAX RATES & RANKINGS - TFK [7/30/04]



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