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Federal and State Cigarette Excise Taxes --- United States, 1995--2009

On April 1, 2009, the largest federal cigarette excise tax increase in history went into effect, bringing the combined federal and average state excise tax for cigarettes to $2.21 per pack and achieving the Healthy People 2010 (HP2010) objective (27-21a) to increase the combined federal and average state cigarette excise tax to at least $2 per pack (1). This report summarizes changes in the federal excise tax, as well as state excise taxes for all 50 states and the District of Columbia (DC) from December 31, 1995 to April 1, 2009.* The findings indicate that the federal excise tax increased from 24 cents per pack in 1995 to $1.01 per pack in 2009, and the average state excise tax increased from 32.7 cents per pack to $1.20 per pack during the same period. These increases represent a 321% increase in the federal excise tax and a 267% increase in the average state excise tax since 1995. Price increases should be combined with other evidence-based policy and clinical interventions to meet HP2010 objectives to decrease smoking prevalence and reduce the burden from smoking-attributable death and disease.

Cigarettes and other tobacco products are taxed by federal, state, and local governments in various ways, including excise taxes, which are levied per unit, such as per pack of 20 cigarettes (2). Federal and state excise tax rates are set by legislation, are contained in federal and state statutes, and typically are collected before the point of sale (i.e., from manufacturers, wholesalers, or distributors), as denoted by a tax stamp.

Federal excise tax data were obtained from an online database that contains statutes and other legislation. From December 31, 2005, to April 1, 2009, the federal excise tax on cigarettes increased three times. As a result of the 1998 budget agreement, the federal cigarette excise tax made a graduated increase from 24 cents per pack to 34 cents per pack on January 1, 2000, and then to 39 cents per pack on January 1, 2002 (2). As a funding mechanism for the State Children's Health Insurance Program (SCHIP), the federal excise tax on cigarettes increased from 39 cents per pack to $1.01 cents per pack effective April 1, 2009.§ These increases resulted in a 321% overall increase in the federal cigarette excise tax since December 31, 1995 (Figure 1).

State excise tax data were collected from the CDC's State Tobacco Activities Tracking and Evaluation (STATE) system database, an electronic data warehouse that contains tobacco-related epidemiologic and economic data and information on state tobacco-related legislation. The STATE system tracks state laws on excise taxes for cigarettes with excise tax data in effect since the fourth quarter of 1995. This study did not include excise taxes that became effective after April 1, 2009. Consistent with the measure used for the HP2010 objective, average state excise taxes were calculated for this report.

From December 31, 1995, to April 1, 2009, a total of 107 separate cigarette excise tax increases and one decrease occurred in 45 states and DC. The state cigarette excise tax did not change from December 31, 1995, to April 1, 2009, in five states (Florida, Mississippi, Missouri, North Dakota, and South Carolina). As of April 1, 2009, South Carolina had the lowest state cigarette excise tax, at 7 cents per pack, whereas New York had the highest state cigarette excise tax, at $2.75 per pack (Table). The average state cigarette excise tax on April 1, 2009, was $1.20 per pack, a 267% increase from the December 31, 1995, average state cigarette excise tax of 32.7 cents per pack.

The average state cigarette excise tax among major tobacco-growing states (Kentucky, Virginia, North Carolina, South Carolina, Georgia, and Tennessee) was 38.5 cents per pack on April 1, 2009, compared with 7 cents on December 31, 1995 (a 444% increase). Among all other states (including DC) the average cigarette excise tax was $1.31 per pack on April 1, 2009, compared with 36 cents on December 31, 1995 (a 263% increase).

In 2003, New Jersey increased its cigarette excise tax to $2.05 per pack, and Rhode Island increased its state cigarette excise tax to $1.71 per pack; when combined with the federal cigarette excise tax in 2003 of 39 cents per pack, these two states became the first to achieve the HP2010 objective. As of April 1, 2009, 28 states had achieved the HP2010 objective of $2.00 per pack when the state cigarette excise tax was combined with the federal excise tax (Figure 2).

Reported by: N Jamison, MPH, M Tynan, A MacNeil, MPH, R Merritt, MA, Office on Smoking and Health, National Center for Chronic Disease Prevention and Health Promotion, CDC.

Editorial Note:

Cigarette smoking and exposure to secondhand smoke result in approximately 443,000 premature deaths, 5.1 million years of potential life lost, and $97 billion in productivity losses in the United States each year (3). Comprehensive tobacco control program and policy recommendations have been provided to the public health community with the goal of reducing tobacco use and secondhand smoke exposure so that they are no longer a significant public health problem in the United States (4,5). CDC and the Institute of Medicine (IOM) recommend that comprehensive tobacco control programs be implemented fully in every state and territory to accelerate the reduction in smoking prevalence among all U.S. citizens and decrease the public health burden of smoking-related disease (4,5). Although tax increases are an evidence-based policy intervention that will reduce smoking prevalence independently, excise tax increases are more effective and have greater public health impact when combined with other evidence-based components of comprehensive tobacco control programs (5).

A 10% increase in the real price of cigarettes is estimated to reduce consumption by nearly 4% (6). The Task Force on Community Preventive Services recommends price increases through excise taxes as an effective policy intervention to prevent smoking initiation by adolescents and young adults, reduce cigarette consumption, and increase the number of smokers who quit (6). The 2000 report of the U.S. Surgeon General, Reducing Tobacco Use, concluded that raising tobacco excise taxes is one of the most effective tobacco prevention and control strategies (2). Specifically, it found that increasing the price of tobacco products would decrease the prevalence of tobacco use, particularly among youths and young adults, and that tobacco excise tax increases would lead to substantial long-term improvements in health (2). Tax revenues also might support the prevention and treatment components of comprehensive state tobacco control programs (2).

Although the average cigarette excise tax among tobacco-growing states has increased by a greater percentage (444% since December 31, 1995) compared with non--tobacco-growing states (264% since December 31, 1995), the individual cigarette excise tax rates in these states and other bordering southeastern states remain substantially lower than the rest of the country (Figure 2). In addition to having lower excise taxes, these states typically do not have strong statewide tobacco control policies, such as laws that would protect the public from secondhand smoke exposure in worksites, restaurants, and bars.

Persons in lower-income groups usually smoke more, meaning they expend a greater share of their income to cigarette excise taxes than other socioeconomic groups (2,7,8). Cigarette excise taxes increase the purchase price of cigarettes and can pose a disproportionate economic burden on lower socioeconomic populations (7--9). However, because low-income groups are more responsive to price increases, increasing the real price of cigarettes can reduce cigarette consumption among low-income smokers by a greater percentage than among higher-income smokers, and thereby diminish socioeconomic smoking disparities (7--9). As excise tax increases diminish these smoking disparities, they potentially reduce disparities in morbidity and life expectancy (9). In addition to gaining health benefits attributable to quitting, groups with lower incomes will spend less on cigarettes and more resources will be available to spend on food, housing, and other goods (7).

The findings in this report are subject to at least three limitations. First, the STATE system only collects state-level excise tax data; it does not reflect city, county, or other local excise tax or any state or local sales tax that might be in place in some jurisdictions. Although not included in this study, at least 460 local communities impose a local tax on cigarettes, including New York City ($1.50 per pack) and Chicago-Cook County ($2.68 per pack) (10). Second, HP2010 objective 27-21a measures the simple mean of the legislated excise tax in states, not a weighted average that reflects relevant factors such as smoking rate, population size, and demographics. Finally, the excise tax amounts presented in this report, including the HP2010 target of $2, are not adjusted for inflation. Had the HP2010 goal been required to have the buying power of $2.00 when the objectives were published in 2000, the inflation-adjusted goal on April 1, 2009, would be approximately $2.47.**

Increases in state and federal cigarette excise taxes per pack since 1995 have provided an important contribution to preventing tobacco use and promoting cessation. IOM concluded that because excise taxes place a disproportionate burden on lower-income smokers, revenue from excise tax increases should be coupled with existing governmental financing to support cessation programs and services, especially for lower-income smokers. Telephone-based tobacco-use quitlines are an example of existing cessation services that might be expanded using excise tax revenue. Quitlines are a free, evidence-based cessation service currently available to all populations in every state and DC through a toll-free access number (800-QUIT-NOW [800-784-8669]). IOM further recommends that states dedicate a portion of their tobacco excise tax revenue by statute, if constitutionally permissible, to fund state tobacco control programs at levels recommended by CDC (5). If every state were to fund their tobacco control programs at the level of investment recommended by CDC in its Best Practices for Comprehensive Tobacco Control Programs --- 2007, in 5 years an estimated 5 million fewer persons in the United States would smoke, and hundreds of thousands of premature tobacco-related deaths would be prevented each year (4).

Acknowledgment

This report is based, in part, on contributions by R Patrick, JD, C Holmes, SS Eidson, JD, and L Lineberger, MayaTech Corporation, Silver Spring, Maryland; and T Pechacek, PhD, Office on Smoking and Health, National Center for Chronic Disease Prevention and Health Promotion, CDC.

References

  1. US Department of Health and Human Services. Healthy People 2010, 2nd ed. With understanding and improving health and objectives for improving health (2 vols.). Washington, DC: US Department of Health and Human Services; 2000. Available at http://www.healthypeople.gov.
  2. CDC. Reducing tobacco use: a report of the Surgeon General. Atlanta, GA: US Department of Health and Human Services, CDC; 2000. Available at http://www.cdc.gov/tobacco/data_statistics/sgr/sgr_2000/index.htm.
  3. CDC. Smoking-attributable mortality, years of potential life lost, and productivity losses---United States, 2000--2004. MMWR 2008;57:1226--8.
  4. CDC. Best practices for comprehensive tobacco control programs---2007. Atlanta, GA: US Department of Health and Human Services, CDC; 2007. Available at http://www.cdc.gov/tobacco/tobacco_control_programs/stateandcommunity/best_practices.
  5. Institute of Medicine. Ending the tobacco problem: a blueprint for the nation. Washington, DC: The National Academies Press; 2007.
  6. Task Force on Community Preventive Services. Guide to community preventive services: tobacco use prevention and control. Am J Prev Med 2001;20(2 Suppl 1):1--87.
  7. Ross H, Chaloupka FJ. Economic policies for tobacco control in developing countries. Salud Publica Mex 2006;48(Suppl 1):S113--20.
  8. Warner KE, Chaloupka FJ, Cook PJ, et al. Criteria for determining an optimal cigarette tax: the economist's perspective. Tob Control 1995;4:380--6.
  9. Siahpush M, Wakefiled MA, Spittal MJ, Durkin SJ, Scollo MM. Taxation reduces social disparities in adult smoking prevalence. Am J Prev Med 2009;36:285--91.
  10. Boonn A. Top combined state-local cigarette tax rates. Campaign for Tobacco-Free Kids fact sheet. Available at http://www.tobaccofreekids.org/research/factsheets/pdf/0267.pdf.

* For this report, DC is included among results for states.

The federal tax of $50.33 for cigarettes is levied per 1,000 cigarettes. When calculated per pack of 20 cigarettes, this is $1.0066 per pack. For this study, this fractional tax is referred to as $1.01 per pack.

§ Children's Health Insurance Program Reauthorization Act of 2009; public law no: 111-3 (2009).

Available at http://www.cdc.gov/tobacco/statesystem.

**Based on calculation using the Bureau of Labor Statistics Consumer Price Index inflation calculator, available at http://data.bls.gov/cgi-bin/cpicalc.pl.

FIGURE 1. State and federal cigarette excise taxes, by year --- United States,* December 31, 1995, to April 1, 2009

The figure shows state and federal excise taxes by year, December 31, 1995 to April 1, 2009. From December 31, 2005, to April 1, 2009, the federal excise tax on cigarettes increased three times. As a result of the 1998 budget agreement, the federal cigarette excise tax made a graduated increase from 24 cents per pack to 34 cents per pack on January 1, 2000, and then to 39 cents per pack on January 1, 2002 (2). As a funding mechanism for the State Children's Health Insurance Program
(SCHIP), the federal excise tax on cigarettes increased from 39 cents per pack to $1.01 cents per pack effective April 1, 2009. These increases represent a 321% increase in the federal cigarette excise tax.

* District of Columbia is included among results for states.

Objective 27-21a: to increase the combined federal and average state cigarette excise tax to at least $2 per pack.

Alternative Text: The figure above shows state and federal excise taxes by year, December 31, 1995 to April 1, 2009. From December 31, 2005, to April 1, 2009, the federal excise tax on cigarettes increased three times. As a result of the 1998 budget agreement, the federal cigarette excise tax made a graduated increase from 24 cents per pack to 34 cents per pack on January 1, 2000, and then to 39 cents per pack on January 1, 2002 (2). As a funding mechanism for the State Children's Health Insurance Program (SCHIP), the federal excise tax on cigarettes increased from 39 cents per pack to $1.01 cents per pack effective April 1, 2009. These increases represent a 321% increase in the federal cigarette excise tax.

TABLE. State and federal cigarette excise taxes --- United States,* December 31, 1995, and April 1, 2009

Cents per pack of 20 cigarettes

% increase 1995 to 2009

State

December 31, 1995

April 1,
2009

Alabama

16.5

42.5

158

Alaska

29.0

200.0

590

Arizona

58.0

200.0

245

Arkansas

31.5

115.0

265

California

37.0

87.0

135

Colorado

20.0

84.0

320

Connecticut

50.0

200.0

300

Delaware

24.0

115.0

379

District of Columbia

65.0

200.0

208

Florida

33.9

33.9

0

Georgia

12.0

37.0

208

Hawaii

60.0

200.0

233

Idaho

28.0

57.0

104

Illinois

44.0

98.0

123

Indiana

15.5

99.5

542

Iowa

36.0

136.0

278

Kansas

24.0

79.0

229

Kentucky

3.0

60.0

1,900

Louisiana

20.0

36.0

80

Maine

37.0

200.0

441

Maryland

36.0

200.0

456

Massachusetts

51.0

251.0

392

Michigan

75.0

200.0

167

Minnesota

48.0

123.0

156

Mississippi

18.0

18.0

0

Missouri

17.0

17.0

0

Montana

18.0

170.0

844

Nebraska

34.0

64.0

88

Nevada

35.0

80.0

129

New Hampshire

25.0

133.0

432

New Jersey

40.0

257.5

544

New Mexico

21.0

91.0

333

New York

56.0

275.0

391

North Carolina

5.0

35.0

600

North Dakota

44.0

44.0

0

Ohio

24.0

125.0

421

Oklahoma

23.0

103.0

348

Oregon

38.0

118.0

211

Pennsylvania

31.0

135.0

335

Rhode Island

61.0

246.0

303

South Carolina

7.0

7.0

0

South Dakota

33.0

153.0

364

Tennessee

13.0

62.0

377

Texas

41.0

141.0

244

Utah

26.5

69.5

162

Vermont

44.0

199.0

352

Virginia

2.5

30.0

1,100

Washington

81.5

202.5

148

West Virginia

17.0

55.0

224

Wisconsin

44.0

177.0

302

Wyoming

12.0

60.0

400

State average

32.7

120.0

267

Federal excise tax

24.0

101.0

321

Combined federal
and state average

56.7

221.0

290

* District of Columbia is included among results for states.

The federal tax of $50.33 is levied per 1,000 cigarettes. When calculated per pack of 20 cigarettes, this is $1.0066 per pack. This fractional tax was rounded to $1.01 per pack.

FIGURE 2. Progress toward the Healthy People 2010 target* for combined state and federal cigarette excise taxes --- United States,† April 1, 2009

The figure is a map of the United States, showing progress by each state toward the Healthy People 2010 target for combined state and federal cigarette excise taxes. In 2003, New Jersey increased its cigarette excise tax to $2.05 per pack, and Rhode Island increased its state cigarette excise tax to $1.71 per pack; when combined with the federal cigarette excise tax in 2003 of 39 cents per pack, these two states became the first to achieve the HP2010 objective. As of April 1, 2009, 28 states in all had achieved the HP2010 objective of $2.00 per pack when the state cigarette excise tax was combined with the federal excise tax.

* Objective 27-21a: to increase the combined federal and average state cigarette excise tax to at least $2 per pack. Data were calculated by combining the cigarette excise tax rate in each state with the federal cigarette excise tax.

District of Columbia is included among results for states.

Alternative Text: The figure above is a map of the United States, showing progress by each state toward the Healthy People 2010 target for combined state and federal cigarette excise taxes. In 2003, New Jersey increased its cigarette excise tax to $2.05 per pack, and Rhode Island increased its state cigarette excise tax to $1.71 per pack; when combined with the federal cigarette excise tax in 2003 of 39 cents per pack, these two states became the first to achieve the HP2010 objective. As of April 1, 2009, 28 states in all had achieved the HP2010 objective of $2.00 per pack when the state cigarette excise tax was combined with the federal excise tax.

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Date last reviewed: 5/21/2009

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