A new policy brief from Health Affairs and the Robert Wood Johnson Foundation examines tobacco taxes, one of the tactics public health officials use to try to reduce smoking. The rule of thumb in the United States is that a 10 percent price increase on a pack of cigarettes results in anywhere from a 2.5 percent to a 5.0 percent decline in smoking, with the impact often more pronounced on teens. To curb smoking and raise revenue, the fifty states and the District of Columbia tax cigarettes, at rates ranging from 17 cents a pack in Missouri to $4.35 in New York, with counties and cities sometimes adding their own taxes. This brief provides a discussion on the methodology and public health benefits of governments imposing taxes on tobacco products.
Topics covered by this policy brief include:
- What’s the background and the policy? The 1964 Surgeon General’s report, stating that cigarette smoking was “causally related” to lung cancer in men, brought about subsequent studies, which identified a direct connection between higher prices and lowered tobacco use, bringing about progressively higher taxes for tobacco products. While taxing tobacco had its origins in prerevolutionary America, the brief details the more recent history of tobacco taxes, the different types of taxes, and details a case study of the city of Chicago, now with the most heavily taxed cigarettes in the country, with the tax burden alone amounting to $7.17 a pack.
- What’s the debate? US smoking rates for adults eighteen and older continue to decline. While tobacco taxes have helped bring about those results, the brief notes some of the problems with higher excise taxes and ways that consumers and the tobacco industry can mute their impact. The brief cites the Federal Trade Commission’s contention that some 85 percent of tobacco industry promotional efforts go toward offering price discounts. Despite these discounts, many—including those in the tobacco industry—have pointed out that tobacco taxes are regressive, placing a higher financial burden on poorer Americans, who also smoke at higher rates than better-off Americans.
- What’s next? Three states are holding ballot initiatives on tobacco tax increases this year. And, although many states have considered taxing e-cigarettes, only six have done so. Tobacco taxes remain one of the few ways to raise revenue that does not spark massive opposition.