What makes a good tobacco tax?

smoking tobacco

The tobacco tax is a powerful public health tool.

Tobacco taxes are like antibiotics— dose matters. A drop here and there does nothing. With tobacco taxes, the dose needs to be strong enough to affect the choices of purchasers. This makes phased-in taxes ineffective.

The bare minimum to change behavior is an increase of 10 percent of the cost of a pack. Every 10 percent increase in cigarette prices reduced youth smoking by about 7 percent and total cigarette consumption by about 4 percent.1 Rate increases like these have the greatest effect on pregnant women, young smokers and low-income smokers because they are the most price sensitive. For reference, Missouri has the cheapest cigarettes in the nation at an average price of $5.25 per pack, so a 10 percent increase would be 52 cents.2

Tobacco taxes are one of the most effective means to effect a change in smoking. Missouri has the dubious distinction of having the lowest tax in the nation at 17 cents per pack. Kansas just recently raised their cigarette tax to $1.29 per pack (31st highest in the nation).3 We also have some of the highest rates of tobacco use at 25 percent in Missouri and 22 percent in Kansas. By comparison, the tobacco use rate in Utah is 12%, and in California, 14 percent.4

The other issue to consider in tobacco economics is the cheaper price of off-brand cigarettes. The Master Settlement Agreement of 1998 required that fees paid by cigarette manufacturers be returned to states for the costs of covering smoking-related illnesses. This fee is paid only by the brand manufacturers, like Altria/Phillip Morris that makes Marlboro. This leaves a loophole that means off-brand cigarettes are much cheaper (for reference, in Missouri, Fortuna Soft cigarettes are $1.62 per pack.)5 Unfortunately, since Missouri never closed this loophole, the state will forgo up to $50 million of general revenue yearly. Fixing this loophole was included in the language for some previous attempts to increase the tobacco tax.

Tobacco taxes are more popular with the public than other taxes, but they should not be seen primarily as a revenue generator. They should be evaluated according to their ability to reduce smoking and decrease healthcare costs for the state. A portion of those newly generated funds should also be directed at efforts to improve health including prevention and cessation services or payment for direct health-care costs.

Tobacco polices are most effective when they are part of a comprehensive tobacco plan. Unfortunately neither Kansas nor Missouri has invested in tobacco prevention. The most effective plans in other states have included high tobacco taxes, smoke-free laws, effective enforcement of youth access statutes, mass media campaigns and accessible cessation services.

We can do better.


1. Tauras, J, et al., “Effects of Price and Access Laws on Teenage Smoking Initiation: A National Longitudinal Analysis,” National Bureau of Economic Research Working Paper Number 8331, June 2001; Chaloupka, F, “Macro-Social Influences: The Effects of Prices and Tobacco Control Policies on the Demand for Tobacco Products,” Nicotine and Tobacco Research, 1999; Chaloupka, F & Pacula, R, An Examination of Gender and Race Differences in Youth Smoking Responsiveness to Price and Tobacco Control Policies, National Bureau of Economic Research, Working Paper 6541, April 1998.

2. What a Pack of Cigarettes Costs, State by State; by Noah Kulwin Aug. 1, 2014 http://www.theawl.com/2014/08/ how-much-a-pack-of-cigarettes-costs-state-by-state. Accessed Feb. 25, 2016.

3. State Cigarette Excise Tax Rates and Rankings, Campaign for Tobacco Free Kids, https://www.tobaccofreekids.org/ research/factsheets/pdf/0097.pdf. Accessed Feb. 25, 2016.

4. Smoking and tobacco Use: State Highlights. CDC http://www.cdc.gov/tobacco/data_statistics/state_data/state_highlights/2012/states/missouri/index.htm. Accessed Feb. 25, 2016.

5. CigarettePrices.com website. http://www.cigaretprices.com/ Missouri.html. Accessed Feb. 25, 2016

This post originally appeared in Kansas City Medicine, Spring 2016 edition.



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