New Tobacco Taxes: State and Federal

by Meagan Dorsch and Karmen Hanson

Tobacco is the nation's leading cause of preventable death. An estimated 438,000 people in the United States die prematurely from smoking or exposure to secondhand smoke annually—about 1 in 5 deaths each year. 

In the United States, costs associated with cigarette smoking are $193 billion annually, with more than $96 billion in health care expenditures and $97 billion in lost productivity, according the Centers for Disease Control and Prevention (CDC). State governments pay for a significant portion of these costs through Medicaid, state employee health care costs and other programs.

Our research at NCSL, several states have increased state cigarette excise taxes in an effort to help pay for increased health costs in Medicaid and other state programs. In addition, almost twenty states have proposed raising tobacco taxes during this legislative session. More than a dozen states would specifically use that money to help close budget shortfalls.

States are not the only ones raising the tax on tobacco products. President Barack Obama signed legislation in February as part of the State Children's Health Insurance Plan (SCHIP), that increases the federal cigarette excise tax to $1.00 beginning today.

According to USA Today, if you add in the new federal and state taxes, cigarettes could go up by more than three dollars per pack in several states. 

But will these higher prices be an incentive for people to kick the habit? Many states sponsor a state-wide tobacco cessation program to assist residents that would like to quit smoking or using tobacco. These programs have been created in response to health problems as well as the related state costs in caring for people, including state employees, with tobacco related diseases and conditions. Many of the programs have reported an increase in calls for assistance, and some have backlogs of people waiting for free nicotine replacement or tobacco cessation products.

Higher prices or not, states will continue to work at reducing their expenditures and improving the health of all of their employees and residents.

Comments

[Jon Morgan]

Looks like it's working already: http://www.washingtonpost.com/wp-dyn/content/article/2009/04/02/AR2009040204200.html