Excise Taxes

National/Reports

Biggest U.S. tax hike on tobacco takes effect
The federal tobacco increase that raises tobacco taxes from 39 cents to $1.01 a pack took effect on April 1st. At the same time, many states desperate for revenue are also increasing their state tobacco taxes. The combined cigarette taxes in some states are as high as $3.76 per pack. Some tobacco companies have decided to absorb the additional costs while others are increasing prices on many of their products. Past tobacco tax increases have shown that for a 10% price increase there is a corresponding tobacco consumption decrease of 4%. Matthew McKenna, director of the Office of Smoking and Health at the Centers for Disease Control and Prevention predicts that the tax hike will prompt 1 million current smokers to quit and many more to reduce their current use. Click here to read more.

Border zone cigarette taxation: Arkansas’s novel solution to the border shopping problem (AR)
On March 1, the state cigarette tax in Arkansas increased from 59 cents to $1.15 per pack. The new tax rate will be higher than in any of the six adjoining states, except for Texas. The state is using a novel strategy to prevent a practice called “border shopping,” in which smokers cross state lines to buy cigarettes at a lower tax rate. The Arkansas tax rate will be variable in towns along state borders that are located adjacent to an out-of-state town. The Arkansas tax will be adjusted to no more than three cents above the tax rate in the adjoining state. The price differential with bordering states will be lower, so the incentive to leave the state for cheaper cigarettes will be virtually eliminated. Click here to read the full analysis on this tax policy.

Florida Senate approves cigarette tax 39-0 with a twist for cigars (FL)
The Florida Senate passed without dispute a bill that will increase the state tobacco tax on cigarettes by $1 and add a $1 per ounce surcharge to all cigars and smokeless tobacco products. The bill also includes restrictions on internet tobacco sales to minors. The bill’s sponsor, Senator Ted Deutch, says the measure has the potential to save the state $4 billion in tobacco-related illness expenditures. There are some exemptions to the tax. The cigar surcharge only applies to tobacco sold in Florida, and not to local producers that ship their cigars outside the state. The bill provides Seminole or Miccosukee tribal members with tax-exempt coupons, rather than labeling tax-free cigarettes and fining anyone caught with them other than tribal members. Click here to read more.

Hawaii proposal to hike cigarette taxes advances (HI)
A proposal is advancing in the state legislature that would raise Hawaii’s cigarette tax by 40 cents. The revenue from the increased taxes would be dedicated to cancer research, a trauma system, community health centers, emergency medical services, and tobacco prevention. Several other anti-tobacco bills also passed in legislative committees, including a bill that would tax smokeless tobacco products 105% by 2011 and another that bans incarcerated individuals from smoking while imprisoned. State Governor Linda Lingle has implied that she would likely favor an increase in the tobacco tax. Read more here.

Proposal to change ND tobacco measure falls (ND)
North Dakota’s voter-approved measure to reserve $12.9 million in state funds for tobacco control was recently the subject of debate in the state House. Last fall, a 54% majority of voters approved the proposal, which called for a tobacco control committee to operate separately from the state health department to draft a comprehensive state tobacco control plan. Legislators ultimately voted against changing the tobacco control plan to eliminate the committee and decrease the funding. Lawmakers stated that they chose to vote ‘no’ to the changes rather than going against their constituents’ wishes. Click here to read more. Related: Higher tobacco tax, bar smoking ban on ND agenda Having survived this legislative challenge, the state anti-tobacco committee is drafting the state tobacco control plan. Early documents reveal that the committee is considering a statewide smoking ban and a two dollar increase in the state cigarette tax. Although the committee is moving forward with its work, attempts to change the terms of the voter-approved plan may resurface in the state legislature. Click here for more information.

New Ohio ad campaign calls for taxing all tobacco products at the same rate: Increased tax would raise critical funds for state tobacco prevention programs (OH)
A coalition of public health organizations launched a two-week radio ad campaign in Ohio promoting a state tax on all tobacco products, including smokeless tobacco and flavored little cigarettes, at the same rate as cigarettes. The ad communicates that the increased revenue from the tax would fund critical tobacco control programs to prevent kids from using tobacco. The estimated $50 million annual revenue from the tax increase would be dedicated to the Ohio Department of Health specifically to be used for tobacco prevention and cessation programs. Click here to read the full press release by the Campaign for Tobacco-Free Kids.

Rhode Island cigarette tax increase delivers victory for kids and taxpayers; $1 increase gives state highest cigarette tax in the nation (RI)
Rhode Island legislators recently passed Governor Don Carcieri’s supplemental budget proposal to raise the state’s cigarette tax by a dollar and to increase the tax on most other tobacco products as of April 10. At $3.46 per pack, the state cigarette tax is now the highest in the country. The tax will prevent thousands of youths from becoming smokers, encourage smokers to quit, and generate an estimated $13.3 million in tax revenue. The tax will decrease overall tobacco use since both cigarettes and non-cigarette tobacco products will be less affordable. Click here to read more. The Campaign for Tobacco-Free Kids has praised the tax increase and encourages the state’s legislators to dedicate additional funding to tobacco prevention and cessation programs. Click here to read a statement from CTFK.

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