Two-Thirds of Voters Favor a $1 Tax Hike on a Pack of Cigarettes
More Than $9 Billion In New Taxes
It seems there could be no better time to suggest a tax hike on cigarettes to states grappling with budget deficits. By increasing cigarette taxes by $1 per pack, the states could raise more than $9.1 billion in new annual revenue, says the report released by a coalition of public health organizations claims. A report by the Center on Budget and Policy Priorities showed 2010 state budget shortfalls totaling $194 billion, or 28%, with the situation in 2011 only slightly better.
At the same time, when Texas increased cigarette tax by $1 per pack in 2007, cigarette tax revenues increased almost three-fold within a year, despite a 21% decline in the number of packs sold in the state. The same pattern occurs in states with much smaller populations.
The report projects the revenue that each state could earn by increasing cigarette taxes based on research showing every 10% increase in cigarette prices reduces total smoking rates by 4%. And, an added benefit to the reduced smoking from the tax hike would be saving $52.8 billion in health care costs.
Preventing Kids From Becoming Smokers
Second, the tax hike would also reduce smoking and save lives, the report says. Specifically, the tax hike would prevent more than 2.3 million kids from becoming smokers; prompt more than 1.2 million adult smokers to quit; and prevent more than 1 million premature, smoking-caused deaths.
"We have irrefutable evidence that raising the tobacco tax lowers smoking rates among adults and deters millions of children from picking up their first cigarette," said John Seffrin, CEO of the American Cancer Society Cancer Action Network. Nancy Brown, CEO of the American Heart Association added, "Raising tobacco taxes will ... reduce health care costs and revitalize critical health and education programs that too often fall victim to state budget cuts."
Not only that, but when it comes to address state budget deficits, voters also far prefer the option of higher tobacco taxes (60%) to other options, such as other tax increases on different programs. More than 70% opposed every other option presented and 59% of voters across all parties prefer a candidate who supports the tobacco tax over one who opposes it.
Tobacco Makers Oppose Any Tax Hike
But critics, mostly from Big Tobacco, argue that smokers would simply buy cheaper brands or smuggled ones. Tobacco makers, such as Altria (MO), Reynolds American (RAI) and Lorillard (LO) which felt the impact on demand from the recent tax hike, oppose any tax hike.
The report says that tobacco use is the leading preventable cause of death in the U.S., killing more than 400,000 people and costing $96 billion a year in health care costs.