Excise Taxes

In recent years, many states have increased their excise taxes on cigarettes and these increases are expected to continue in 2011, further burdening adult smokers. Since 2009, the federal government, 20 states, and Washington D.C. have increased the cigarette excise tax rate. Going back a bit further, since fiscal year (FY) 2000, state governments, including Puerto Rico have raised the cigarette state excise tax (SET) 107 times. During that same period, the federal government raised the federal excise tax (FET) on cigarettes three times. One of these increases took place in April of 2009, raising the cigarette FET by 61.66 cents per pack to $1.01 per pack.

Due to these increases, adult smokers now face higher tax burdens across the country. On average, federal and state excise taxes account for $2.04 per pack of cigarettes, or around 40% of the total pack price, depending on the state. In FY 2009, the federal and state governments raised approximately $24.3 billion in revenue from cigarette excise taxes . During this time, states also raised an additional $4.1 billion in general sales taxes on cigarettes, as well as 8.8 billion in tobacco settlement payments. State excise taxes on cigarettes vary widely, ranging from $0.17 per pack in Missouri to $4.35 per pack in New York. These state excise taxes raised approximately $15.7 billion in FY 2009 for state governments. Moreover, eight states have local municipalities that levied additional cigarette taxes, ranging from $0.01 to $2.00 per pack.

Aside from the unfair burden these tax increases place on adult tobacco consumers, cigarette tax increases: 

• promote purchases through untaxed or lower-tax venues;
• create additional incentives for contraband and counterfeit tobacco product trafficking;
• harm states by increasing incentives for adult tobacco consumers to buy tobacco products through lower-tax or untaxed venues;
• are costly to legitimate business, including retailers and wholesalers; and
• do little to solve systemic state budget problems and can lead to less stability in the states’ finances.

 
Click here to find out recent tobacco tax activity in your state.

Additional resources regarding excise taxes on tobacco products are available below:

• For more information about excise taxes on cigarettes click here.
• For more information about excise taxes on moist smokeless tobacco products click here.
• For more information about excise taxes on cigars click here.