State and Local Tobacco Tax Increases

The Issue:

In recent years, many state and local governments have raised tobacco taxes to help balance their budgets and help fund new programs:

  • Nearly 520 cities, towns, and counties also impose local cigarette excise taxes.

  • Since FY 1999, federal and state governments increased their cigarette excise tax rates more than 100 times. In addition, since 2009, localities have increased local excise tax rates a dozen times.

  • 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

  • Lost sales can hurt your business by driving consumers across state and municipal borders to purchase lowerpriced tobacco – as well as other retail products, such as milk, bread, and gasoline. This results in lost revenue,not only for retailers but local municipalities and states as well.

  • Cigarette and other tobacco product sales account for 36% 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.

  • Tax-paid 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 are still facing record-high budget deficits, and more tobacco tax hike proposals are likely in 2011. Instead, our legislators should focus on ways to get their state budgets and spending under control.