Another Top-10 List — Lighting Up, the Greatest Cigarette Taxes Across the Country

While the 4th of July looms, we as a country will light-up the sky, but many Americans light up daily with cigarettes.

Yesterday, in travels back home to Houston after an economic forecast presentation, I once again faced a delayed flight. What amazed me was the mass number of people that headed back through security to have a quick smoke. I would speculate that at least one-third if not almost one-half of the passengers disappeared for 30 minutes. And I had a good friend pass away last month at too-young age from lung cancer — yes, a smoker. So this topic is on my mind. In full disclosure, I do not smoke. Nor will I judge those who do.

Cigarettes and other sin taxes have become a major source of income for many states and locales. The Tax Policy Center estimates that total state and local tobacco tax collections in the latest available year of data (2011) tallied $17.6 billion. These taxes can be ironic as they are often earmarked for education or public schools, a group we specifically work to steer away from smoking. So while society faces the costs from smokers, at the same time the smokers often fund highly important needs with the resulting taxes.

The Centers for Disease Control & Prevention (CDC) estimates that 18.1 percent of the U.S. adult population smokes (aged 18 and up). Among men, one-out of five smoke (20.5 percent) and one-out-of every six women (15.8 percent). For those at or below the poverty level, 27.9 percent of adults smoke versus 17 percent of those earning more than the poverty level.

The CDC estimates that smoking is the number one preventable cause of death in the U.S., resulting in 480,000 premature deaths each year.

Where do American’s pay the most for the privilege of lighting up, so-to-speak? The Tax Foundation reports the following state taxes on cigarettes:

7-3-14a table

Federal cigarette taxes commenced during the Civil War in 1864 as a revenue measure to fund the War. The Federal excise tax on cigarettes now totals $1.01 per pack. That’s a nickel per cigarette. Iowa started the first state-level cigarette tax in 1921, and by 1969 all 50-states had a similar tax, though at varying levels. Last year, the President proposed a 94 cent per pack increase, with the proceeds to fund early childhood education. That increase alone was budgeted, if passed, to create $78 billion in additional tax collections over 10 years.

Add to these state taxes both local and federal rates, and the range from low to high is adequate to encourage illegal activity. The lowest tax rate is Missouri at 17 cents per pack. In Chicago, the combined state and local cigarette tax is $6.16. Plus the $1.01 Federal tax sums to $7.17, versus Missouri at $1.18. Smuggling and the resulting black-market goods are inevitable.

Want to compare your state’s cigarette taxes? Click the Tax Foundation’s side at http://taxfoundation.org/blog/state-cigarette-tax-rates-2014

Interested in smoking statistics? The Centers for Disease Control and Prevention summary statistics can be seen at http://www.cdc.gov/tobacco/data_statistics/fact_sheets/adult_data/cig_smoking/

Now you know why smoking will likely never be completely abandoned – the taxes are too important. And now you know why Colorado and Washington passed their new smoking laws.

We are driven by economics.

Ted

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