Tax increases on tobacco products at both the state and federal level continue to be one of our biggest concerns.
State and Local Tobacco Tax Increases
In recent years, many state and local governments have raised tobacco taxes to help balance their budgets and help fund new programs:
- Hundreds of cities, towns, and counties also impose local cigarette excise taxes.
- Since FY 2000, federal and state governments have increased their cigarette excise tax rates more than 145 times. Numerous localities have increased local excise tax rates as well.
- More than half of the average price of a pack of cigarettes now goes to the government in taxes and other fees.
Why Tobacco Tax Increases Matter to You
- Increased tobacco excise taxes can hurt your business by driving adult tobacco consumers to other sources such as across state and municipal borders to purchase lower priced tobacco—while there, they may purchase other retail products, such as milk, bread, and gasoline as well. This results in lost sales and revenue, not only for retailers, but local municipalities and states as well.
- Cigarette and other tobacco product sales account for over 40% of all in-store sales at convenience stores nationwide, according to the National Association of Convenience Stores.
- Cigarette tax increases can create additional incentives for criminal activity, including contraband and counterfeit tobacco product trafficking.
- Cigarette sales in the U.S. continue to decline each year. This can create funding shortfalls in state and local programs that rely on cigarette tax revenues. Those revenue gaps then create pressure for additional tax increases.
- Tax increases are not the answer, especially in this economic climate. States and municipalities continue to face budget deficits, and more tobacco tax hike proposals are likely. Instead, our legislators should focus on ways to get their state budgets and spending under control.