Increasing Cigarette Taxes Is ‘Popular’ Way for States To Deal with Budget Shortfalls

Increasing cigarette taxes is "emerging as a popular solution" for states seeking to generate revenue and "bolster faltering budgets," NPR's "Morning Edition" reports. According to the National Conference of State Legislatures, of the 44 states "confronting budget shortfalls," 19 are considering raising cigarette taxes by between 10 cents and 61 cents per pack. Current tobacco taxes range from a low of three cents per pack in Virginia to $1.42 in Washington state. New York's recently approved tobacco tax "hike" to $1.50 per pack will give that state the highest tax in the nation when it goes into effect in April. NPR reports that governors are "leading the push" for higher cigarette taxes in states such as Kansas, Connecticut and Minnesota. Indiana Gov. Frank O'Bannon (D) has proposed a per-pack increase of 50 cents to help "patch" a projected $1.3 billion state budget "shortfall" and "contain skyrocketing Medicaid costs." O'Bannon said, "I think the studies show that when you raise the cost of cigarettes, teenagers are less likely to start, and some adult smokers are more likely to quit. Certainly the disease caused by smoking increases Medicaid costs, which is another general fund cost to states, so it has a health benefit there that goes well with the increased revenue." Lee Dixon, director of NCSL's health policy tracking service, said that there is "little political will" to raise income or sales taxes, but cigarette taxes are "politically appealing" and find "strong public support" because they only affect about a quarter of the U.S. population. Tobacco companies are "fighting" the move to higher taxes, saying that while it "may be the politically expedient thing to do," it is "unfair." John Singleton, director of public affairs for RJ Reynolds, said, "You're essentially taxing a relatively small percentage of the population for the benefit of the entire state. We think that ... ultimately amounts to tax profiling." Singleton said that if combined state and federal tobacco taxes, which average 79 cents per pack, are added to the amount of money states are getting from the 1998 tobacco settlement, state and federal governments are collectively earning $80 million daily from tobacco. The full segment will be available in RealPlayer Audio online after noon ET (Elliott, "Morning Edition," NPR, 2/13).