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In the United States, cigarettes are taxed at both the federal and state levels, in addition to any state and local sales taxes and local cigarette-specific taxes. Cigarette taxation has appeared throughout American history and is still a contested issue today.
Although cigarettes were not popular in the United States until the mid-19th century, the federal government still attempted to implement a tax on tobacco products such as snuff early on in its history. In 1794, secretary of the treasury Alexander Hamilton introduced the first ever federal excise tax on tobacco products. Hamilton's original proposal passed after major modifications, only to be repealed shortly thereafter with an insignificant effect on the federal budget. [1] Even though Hamilton's tax on tobacco failed, tobacco taxation continued to play an important role in American history.
On July 1, 1862, the United States Congress passed excise taxes on many items including tobacco. This occurred as a result of the Union's increasing debt during the American Civil War and the federal government's need for additional revenue. After the war, many of these excise taxes were repealed but the tax on tobacco remained. In fact, by 1868 the federal government's main source of income came from these lingering tobacco taxes. [2]
Despite the excise tax of the federal government, U.S. states did not ratify a tobacco excise tax until well into the 20th century. In 1921, Iowa became the first state to pass a tobacco excise tax at the state level in addition to the federal tax. [3] Other states quickly followed suit, and by 1950, 40 states and Washington D.C. enacted taxes on cigarette sales. [4]
By 1969, all states, the District of Columbia and the territories had implemented cigarette taxes. Several cities such as Chicago and New York City have also implemented their own citywide cigarette taxes. The combined federal, state, county, and local tax on a pack of 20 cigarettes in the city of Chicago, in Cook County, Illinois, is $7.42, the highest in the entire country. The lowest rate in the nation is in Missouri, at 17 cents, where the state's electorate voted to keep it that way in 2002, 2006, 2012, and 2016. The American Cancer Society opposed the increase in 2016 (Amendment 3). Their opposition is largely attributed to close ties with in-state institution Washington University in St. Louis. That university desired greater freedom to apply for grant money under the proposed law which largely prohibited such expenditures. [5] [6]
On February 4, 2009, the Children's Health Insurance Program Reauthorization Act of 2009 was signed into law, which raised the federal tax rate for cigarettes on April 1, 2009 from $0.39 per pack to $1.01 per pack. [7] The increase was to help cover the cost of increased coverage under the State Children's Health Insurance Program (SCHIP).
One of the biggest criticisms of the bill came from Americans for Tax Reform which feared that it would lead to lower state tax revenue. [8] According to Nobel Prize-winning economist Gary Becker, who has studied the long-run price elasticity of cigarettes, the tax increase as a result of the Children's Health Insurance Program Reauthorization Act increases the price of cigarettes 13.3% which ultimately means a 10.6% decrease in unit sales. The Tax Foundation calculates these numbers to determine a predicted $1 billion loss for states. Another argument against this bill claims it to be regressive, holding that the tax increase unfairly targets the poor because according to the Centers for Disease Control and Prevention (CDC) more than half of all smokers are low income. [9] The CDC also notes that, "However, because low-income groups are more responsive to price increases, increasing the real price of cigarettes can reduce cigarette consumption among low income smokers by a greater percentage than among higher income smokers, and thereby diminish socioeconomic smoking disparities. [10] Further, lower income communities also suffer from tobacco-related illnesses at a disproportionately higher rate than their higher income counterparts. [11]
One of the reasons for the support of increased cigarette taxes among public health officials is that many studies show that this leads to a decrease in smoking rates. [12] The relationship between smoking rates and cigarette taxes follows the property of elasticity; the greater the amount of the tax increase, the fewer cigarettes that are bought and consumed. [13] This is especially prevalent among teenagers. For every ten percent increase in the price of a pack of cigarettes, youth smoking rates overall drop about seven percent. [14] This rate is also true amongst minorities and low income population smokers. [15] Similar reductions in smoking rates following cigarette tax increases have been found among sexual minorities. [16] The rates of calls to quitting hotlines are directly related to cigarette tax hikes. When Wisconsin raised its state cigarette tax to $1.00 per pack, the hotline received a record of 20,000 calls in a two-month time period versus its typical 9,000 calls annually. [17]
An analysis of smoking and cigarette tax rates in 1955 through 1964, prior to the Surgeon General’s first report and general antismoking sentiment, shows the same relationship between tax increases and declining smoking rates that are prevalent today, suggesting that popular attitudes towards smoking are not a confounding factor. [13] Tobacco taxes also produce significant improvements in public health, and arguments about alleged adverse economic effects of such taxes tend to be unsupported. [18]
In 2012, RTI International conducted an analysis of data from the 2010-2011 New York and national Adult Tobacco Surveys to assess the financial burden cigarette taxes place on low-income families for the New York State Department of Health. According to ABC News, the study found that "higher cigarette taxes may be financially hurting low-income smokers rather than making them more likely to quit." Among the 13,000 surveyed in New York State, lower income smokers (those in households making under $30,000) spent 23.6 percent of their income on cigarettes, compared to two percent by higher income New York residents and an average of 14 percent among lower income smokers nationally. [19] [20]
States with high taxes often have cigarettes smuggled in from lower taxed states and a black market is created. The Tax Foundation estimated that New York State lost an estimated $1.63 billion to black market sales. [21]
Tobacco companies themselves have been involved in tobacco smuggling. In 2010 in Canada, R. J. Reynolds Tobacco Company agreed to pay a total of $325 million to settle claims related to the smuggling. A Reynolds subsidiary, Northern Brands International Inc., was fined $75 million after pleading guilty under the Canadian Criminal Code to one count of conspiracy for helping others sell contraband cigarettes. While the smuggling operation was ongoing in the 1990s, tobacco companies were lobbying federal and provincial governments to lower cigarette taxes, pointing to the prevalence of contraband product as all the more reason to reduce taxes. [22] [23]
From foreign experience, scholars also suggest that while tax on cigarettes can allow total cigarette consumption to be effectively controlled, they can also increase smuggling and cause a loss of income for the government. As smuggled cigarettes are a substitute of taxed cigarettes, the price of the former would also increase for higher tax rates. Consumption of cigarettes in total then drop as consumers must pay more regardless of whether they buy smuggled or taxed products. [24]
While the price of cigarettes has continuously increased since 1965, the percentage of that price going towards taxes is now half of what it was then. [15] As of 2011, Phillip Morris lists total government revenue, including federal, state, local, and sales taxes, as 55% of the estimated retail price of a pack of cigarettes in the United States. [25]
According to data from the World Health Organization on cigarette taxes around the world, the U.S. is ranked 36th out of the 50 most populous countries in terms of the percent of cigarette pack costs from taxes. Their data estimates that taxes make up 42.5% of the cost of a pack of cigarettes in the U.S., compared to 82.2% in the United Kingdom, which has the highest cigarette taxes. [26]
The following table lists U.S. state and territory tax rates (as of September 1, 2023): [27] [28] [29] [30]
| Excise tax per pack (in USD) | State or territory |
|---|---|
| 0.675 | Alabama |
| 2.00 | Alaska |
| 2.00 | Arizona |
| 1.15 | Arkansas |
| 2.87 | California |
| 1.94 | Colorado |
| 4.35 | Connecticut |
| 2.10 | Delaware |
| 1.339 | Florida |
| 0.37 | Georgia |
| 3.20 | Hawaii |
| 0.57 | Idaho |
| 2.98 | Illinois |
| 0.995 | Indiana |
| 1.36 | Iowa |
| 1.29 | Kansas |
| 1.10 [31] | Kentucky |
| 1.08 [32] | Louisiana |
| 2.00 | Maine |
| 3.75 | Maryland |
| 3.51 | Massachusetts |
| 2.00 | Michigan |
| 3.46 | Minnesota |
| 0.68 | Mississippi |
| 0.17 | Missouri |
| 1.70 | Montana |
| 0.64 | Nebraska |
| 1.80 | Nevada |
| 1.78 | New Hampshire |
| 2.70 | New Jersey |
| 2.00 | New Mexico |
| 5.35 [33] | New York |
| 0.45 | North Carolina |
| 0.44 | North Dakota |
| 1.60 | Ohio |
| 2.03 | Oklahoma |
| 3.33 | Oregon |
| 2.60 [34] | Pennsylvania |
| 4.25 | Rhode Island |
| 0.57 | South Carolina |
| 1.53 | South Dakota |
| 0.62 | Tennessee |
| 1.41 | Texas |
| 1.70 | Utah |
| 3.08 | Vermont |
| 0.60 | Virginia |
| 3.025 | Washington |
| 1.20 [35] | West Virginia |
| 2.52 | Wisconsin |
| 0.60 | Wyoming |
| 4.50 [36] | District of Columbia |
| 3.75 | Northern Mariana Islands |
| 5.10 | Puerto Rico |
| 4.00 | Guam |
| 2.50 | American Samoa |
| 1.10 | U.S. Virgin Islands |
The above table does not include the federal excise tax on cigarettes of $1.01 per pack, cigarette taxes levied by individual municipalities (such as New York City, Chicago, and Anchorage), or sales taxes levied in addition to the retail price and excise taxes.
Taxes on smokeless (chewing) tobacco, as well as (and often concurrent with) snuff, cigars and pipe tobacco, are also common in the United States. Forty-nine states and the District of Columbia have such a non-cigarette tax(es), Pennsylvania being the sole exception, with no cigar tax at all (though it considers small cigars to be cigarettes for taxation purposes) and the last to impose taxes for smokeless and pipe tobaccos in 2016. [37] Of the 49 states that do impose in this category, Florida does not tax cigars, though all other tobacco products are taxed. The federal government charges different non-cigarette excise taxes, according to the following 6 categories: snuff, chewing tobacco, pipe tobacco, roll-your-own, large cigars, and small cigars. [38] Cigarette papers and tubes are also taxed. As of June 2019, ten states and Washington, D.C. also had excise taxes on e-cigarettes. [39] [40] [ failed verification ]
As of December 31, 2021, 30 states and the District of Columbia have passed legislation that requires a tax on electronic cigarettes. Twelve states tax e-cigarettes per milliliter of liquid or consumable material. Fifteen states, the District of Columbia, and the U.S. Virgin Islands tax e-cigarettes on a percentage of a specified cost. Four states tax closed e-cigarette systems (prefilled cartridges) per milliliter of liquid and open e-cigarette systems (refillable cartridges) on a percentage of a specified cost. [41]
VALM: Manufacturer Price/Wholesale Purchase Price
VALW: Wholesale Sales Price
VALWD: Wholesale Sales Price with Discount
VAL: Selling Price
| State | Vape Tax/ E-Cig Tax | Is non-nicotine e-liquid taxable? |
|---|---|---|
| Alabama | No Tax | No |
| Alaska | No Tax | No |
| Arizona | No Tax | No |
| Arkansas | No Tax | No |
| California | 56.32% VALM, 12.5% VAL | No |
| Colorado | 55% VALM | No |
| Connecticut | 10% VALW Open, $0.40/ mL closed | No |
| Delaware | $0.05 / mL | No |
| District of Columbia | 80% VALW | No |
| Florida | No Tax | No |
| Georgia | $0.05/mL closed replaceable cartridge, 7% VALW open & VALW single-use closed | Yes |
| Hawaii | No Tax | No |
| Idaho | No Tax | No |
| Illinois | 15% VALM | Yes |
| Indiana | 15% VALW closed cartridge, 15% VAL open | Yes |
| Iowa | No Tax | No |
| Kansas | $0.05/ mL | Yes |
| Kentucky | 15% VALWD open, $1.50/cartridge closed | Yes |
| Louisiana | $0.15/ mL | No |
| Maine | 43% VALM | Yes |
| Maryland | 12% of retail, 60% of retail on 5mL or less | Yes |
| Massachusetts | 75% VALM | Yes |
| Michigan | No Tax | No |
| Minnesota | 95% VALM | No |
| Mississippi | No Tax | No |
| Missouri | No Tax | No |
| Montana | No Tax | No |
| Nebraska | No Tax | No |
| Nevada | 30% VALM | Yes |
| New Hampshire | 8% VALM open, $0.30/mL closed | No |
| New Jersey | 10% of retail open, $0.10/mL closed | Yes/No respectively |
| New Mexico | 12.5% of VALM open, $0.50/cartridges 5mL or less closed | Yes |
| New York | 20% VAL | Yes |
| North Carolina | $0.05 / mL | No |
| North Dakota | No Tax | No |
| Ohio | $0.10 / mL | No |
| Oklahoma | No Tax | No |
| Oregon | 65% VALM | Yes |
| Pennsylvania | 40% VALW | Yes |
| Rhode Island | No Tax | No |
| South Carolina | No Tax | No |
| South Dakota | No Tax | No |
| Tennessee | No Tax | No |
| Texas | No Tax | No |
| Utah | 56% VALM | Yes |
| Vermont | 92% VALW | Yes |
| Virginia | $0.066 / mL | No |
| Washington | $0.09/mL open > 5mL, $0.27/mL open <= 5mL, $0.27/mL closed | Yes |
| West Virginia | $0.075 / mL | Yes |
| Wisconsin | $0.05 / mL | Yes |
| Wyoming | 15% VALM | No |
The above table does not include electronic cigarette taxes levied by county and municipal-level jurisdictions (such as those placed by Cook County, Illinois, and the city of Chicago), or sales taxes levied in addition to the retail price and excise taxes.
A cigar is a rolled bundle of dried and fermented tobacco leaves made to be smoked. Cigars are produced in a variety of sizes and shapes. Since the 20th century, almost all cigars are made of three distinct components: the filler, the binder leaf which holds the filler together, and a wrapper leaf, which is often the highest quality leaf used. Often there will be a cigar band printed with the cigar manufacturer's logo. Modern cigars can come with two or more bands, especially Cuban cigars, showing Limited Edition bands displaying the year of production.
A cigarette is a narrow cylinder containing a combustible material, typically tobacco, that is rolled into thin paper for smoking. The cigarette is ignited at one end, causing it to smolder; the resulting smoke is orally inhaled via the opposite end. Cigarette smoking is the most common method of tobacco consumption. The term cigarette, as commonly used, refers to a tobacco cigarette, but the word is sometimes used to refer to other substances, such as a cannabis cigarette or a herbal cigarette. A cigarette is distinguished from a cigar by its usually smaller size, use of processed leaf, different smoking method, and paper wrapping, which is typically white.
Tobacco smoking is the practice of burning tobacco and ingesting the resulting smoke. The smoke may be inhaled, as is done with cigarettes, or simply released from the mouth, as is generally done with pipes and cigars. The practice is believed to have begun as early as 5000–3000 BC in Mesoamerica and South America. Tobacco was introduced to Eurasia in the late 17th century by European colonists, where it followed common trade routes. The practice encountered criticism from its first import into the Western world onwards but embedded itself in certain strata of a number of societies before becoming widespread upon the introduction of automated cigarette-rolling apparatus.
Rolling paper is a specialty paper used for making cigarettes. Rolling papers are packs of several cigarette-size sheets, often folded inside a cardboard wrapper. They are also known as 'blanks', which are used to encase tobacco or cannabis. It may be flavoured.
Excise tax in the United States is an indirect tax on listed items. Excise taxes can be and are made by federal, state, and local governments and are not uniform throughout the United States. Certain goods, such as gasoline, diesel fuel, alcohol, and tobacco products, are taxed by multiple governments simultaneously. Some excise taxes are collected from the producer or retailer and not paid directly by the consumer, and as such, often remain "hidden" in the price of a product or service rather than being listed separately.
A sin tax is an excise tax specifically levied on certain goods deemed harmful to society and individuals, such as alcohol, tobacco, drugs, candy, soft drinks, fast foods, coffee, sugar, gambling, and pornography. In contrast to Pigovian taxes, which are to pay for the damage to society caused by these goods, sin taxes increase the price in an effort to decrease the use of these goods. Increasing a sin tax is often more popular than increasing other taxes. However, these taxes have often been criticized for burdening the poor and disproportionately taxing the physically and mentally dependent.
In a tax system, the tax rate is the ratio at which a business or person is taxed. The tax rate that is applied to an individual's or corporation's income is determined by tax laws of the country and can be influenced by many factors such as income level, type of income, and so on. There are several methods used to present a tax rate: statutory, average, marginal, flat, and effective. These rates can also be presented using different definitions applied to a tax base: inclusive and exclusive.
An indirect tax is a tax that is levied upon goods and services before they reach the customer who ultimately pays the indirect tax as a part of market price of the good or service purchased. Alternatively, if the entity who pays taxes to the tax collecting authority does not suffer a corresponding reduction in income, i.e., the effect and tax incidence are not on the same entity meaning that tax can be shifted or passed on, then the tax is indirect.
Income taxes are the most significant form of taxation in Australia, and collected by the federal government through the Australian Taxation Office (ATO). Australian GST revenue is collected by the Federal government, and then paid to the states under a distribution formula determined by the Commonwealth Grants Commission.
An excise, or excise tax, is any duty on manufactured goods that is normally levied at the moment of manufacture for internal consumption rather than at sale. It is therefore a fee that must be paid in order to consume certain products. Excises are often associated with customs duties, which are levied on pre-existing goods when they cross a designated border in a specific direction; customs are levied on goods that become taxable items at the border, while excise is levied on goods that came into existence inland.
Tobacco politics refers to the politics surrounding the use and distribution of tobacco, likewise with regulations.
Tobacco has a long cultural, economic, and social impact on the United States. Tobacco cultivation in Jamestown, Virginia, in 1610 led to the expansion of British colonialism in the Southern United States. As the demand for Tobacco grew in Europe, further colonization in British America and Tobacco production saw a parallel increase. Tobacco use became normalized in American society and was heavily consumed before and after American independence.
About a quarter of adults in Turkey smoke. Smoking in Turkey is banned in government offices, workplaces, bars, restaurants, cafés, shopping malls, schools, hospitals, and all forms of public transport, including trains, taxis and ferries. Turkey's smoking ban includes provisions for violators, where anyone caught smoking in a designated smoke-free area faces a fine of 188 Turkish lira (~€9.29/$9.90/£8.22) and bar owners who fail to enforce the ban could be fined from 560 liras for a first offence up to 5,600 liras. The laws are enforced by the Ministry of Agriculture and Forestry of Turkey.
The Massachusetts Tobacco Cessation and Prevention Program (MTCP) is an anti-tobacco program run by the Massachusetts Department of Public Health with the goal of decreasing tobacco prevalence in the state of Massachusetts. MTCP has four main components: preventing youth smoking, protecting against second hand smoke, assisting current smokers with quitting, and eliminating tobacco related disparities. Since the program began in, adult smoking rates have declined from 22.6% in 1993 to 16.1% in 2008, allowing Massachusetts the 4th lowest smoking rates in the country.
In Finland, the smoking figures are among the lowest in Europe. There are several factors that have influenced the decrease in the smoking prevalence, such as legislative actions, health promotion and national monitoring systems, policies aimed at reducing tobacco consumption through public awareness campaigns, advertising bans and increased taxation. Ministry of Social Affairs and Health has the leading role in tobacco control in Finland, and one of their main aims is have a more effective ban on sale of tobacco products to children and young people and to prevent sale of illegal tobacco products. Among the key elements in the successful tobacco policy is the traditional collaboration between the health authorities and non-governmental organisations, and intensive health promotion.
Smoking in Albania is prevalent as about 40% of Albanians smoke regularly. In Europe, only Turkey has a higher smoking rate than Albania. Albanians annually spend more than €300 million on tobacco products. Zog I of Albania was reported to smoke 200 cigarettes a day. Albania adopted tough anti-smoking laws in 2007, but they are not strictly enforced. Smoking prevalence is increasing, especially among females ages 13 to 15. The smoking rate for teens between the ages of 13 and 15 is currently 15%.
Taxation in Oklahoma takes many forms. Individuals and corporations in Oklahoma are required to pay taxes or fee charges to both levels of government: state and local. Taxes are collected by the government to support the provisions of public services. The Oklahoma Constitution vested the authority to levy taxes with the Oklahoma Legislature while the Oklahoma Tax Commission is the primary Executive agency responsible for collecting taxes.
The illicit cigarette trade is defined as "the production, import, export, purchase, sale, or possession of tobacco goods which fail to comply with legislation". Illicit cigarette trade activities fall under 3 categories:
Tobacco Industry is a road map of the regulations relating to all tobacco products in Indonesia. Tobacco Industry (TI) contains guidelines and industry classification and the products produced by the tobacco industry in Indonesia, including regulations, policies ribbon and excise, tobacco industry strategies, so on and so forth. Tobacco Industry was first coined by the Directorate General of Agro and Chemical Industry Department in 2009. Tobacco Industry has a significant role for state revenue through taxes and excise, employments, and protection against multiple impacts of tobacco farmers and others. The development of the TI also consider public health in addition to concern on, so that the industry can grow well. TP is a labor-intensive industry, so to the present of TI and its association with upstream form the procurement of raw materials, particularly tobacco, cloves, and other industries are potential labor-absorbing industrial.
Cigarette excise tax in Indonesia is a kind of tax that is functioned to control the retail prices of cigarettes done the Indonesian government on cigarettes and other tobacco products such as cigarettes, cigars, and leaf cigarettes. This provision applies with the existence of Act Number 11 of 1995 concerning Excise, with some revisions referring to Act Number 39 of 2007. This rule was then complemented by Act Number 28 of 2009 concerning Regional Taxes and Regional Levies. Taxation of tobacco with cigarette excise is well distinguished.
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