Tobacco Taxation and Pricing

Raising tobacco excise taxes, which increases tobacco prices, has proven to be one of the most effective measures of reducing demand for and consumption of tobacco. Higher tobacco prices discourage individuals from starting to use tobacco for the first time, particularly youth, and they can motivate individuals who currently use tobacco products to quit or to reduce their frequency and intensity of using. They also help prevent former users from relapsing.^1,2,3 There is a strong negative correlation between cigarette price and overall cigarette consumption (Figure 4.2.11).

Tobacco excise taxation can save a substantial number of lives from premature deaths (Figure 4.2.12). Every one-dollar increase in cigarette excise tax per pack of 20 cigarettes is associated with a one-year increase in life expectancy.⁴ Moreover, tobacco excise taxes yield larger reductions in tobacco use, greater health gains among more price sensitive populations (e.g., youth, individuals with limited incomes), and reduces health disparities. In addition, laws that establish a minimum price for tobacco products have been found to be similarly effective, especially when used in addition to tobacco excise taxes. Raising the lowest allowable selling price (minimum price) reduces tobacco consumption, particularly among individuals with limited incomes who purchase cheaper tobacco products.

Tobacco excise taxes generate revenue that should be used to fund tobacco prevention and cessation programs, including cessation services, mass media campaigns, and public health education programs. All 50 states, Washington, DC, three territories (Puerto Rico, Guam, and Northern Mariana Island), and some local governments (cities, towns, counties) tax cigarettes and other tobacco products.

Despite its proven effectiveness in reducing tobacco use and related health disparities, and potential to fund tobacco control interventions, tobacco excise taxes remain far from fully utilized (Map 4.2.16).⁵ The US federal cigarette tax, for example, was increased from 62 cents to $1.01 per pack in April 2009 and has remained the same since then. It was meant to expand coverage of the State Children’s Health Insurance Program (SCHIP) legislated by the Family Smoking Prevention and Tobacco Control Act. Other tobacco products taxed by the federal government include small and regular cigars, pipe tobacco, roll-your-own (RYO) tobacco, and smokeless tobacco (e.g., chewing tobacco, loose moist snuff, snus, dissolvables).