Over the last 15 years, states have been increasing taxes on the tobacco industry. In fact, the taxes on tobacco products have been raised five times more often than taxes on alcohol. According to the National Association of State Budget Officers (NASBO), between 2000 and the beginning of 2015, taxes on tobacco products have risen 111 times and cut four times. By comparison, taxes on alcohol were raised 23 times and cut 8 times.
Clear inequality exists between the two taxes at a state level as well. Over this 15-year period, a total of 45 states have increased their tobacco taxes at least once; however, only 16 have raised taxes on alcohol.
The sheer number of tax increases may have less to do with tobacco than most would think, though. Brian Sigritz of NASBO says most of these increases are correlated with the recessions that the U.S. has experienced in recent years. In 2003, tobacco products saw tax increases across 19 states. Another fifteen states raised tobacco taxes in 2004, and 16 states jacked up rates in 2010. The largest increases came in 2003 and 2010, during the country’s worst economic troubles.
Connecticut, New York, Rhode Island and Vermont are the most frequent tax increasers; each has 6 since 2000.
While the large number of tax increases means that tobacco prices have been on a steady rise, a significant portion of the taxes have gone to worthwhile causes. An 80-cent increase in Arizona in 2008 has raised $130 million for early childhood education. In addition, President Obama proposed a tax increase in 2013 to fund a universal pre-kindergarten education program.
And proposals for tax increases continue to mount. There are plans to increase Missouri’s current tax of 17 cents (the current lowest in the nation) to around 67 cents per pack. New Jersey is looking to add a tax on e-cigarettes to increase its state revenue. Tobacco taxes have gotten so high in New York that it’s estimated over half of all cigarettes smoked in the state have been illegally brought in from other states.
What does this mean for e-cigarettes?
Many government officials (at both the state and federal level) are aiming to classify e-cigarettes as tobacco products and tax them accordingly. However, until policymakers and voters reach a firm decision about whether to tax e-cigarettes, those who make the switch from tobacco cigarettes can stand to save some money.