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Cigarette Taxes Are on the Rise Posted: May 7th, 2010

By Joe Taylor Jr.

Joe Taylor Jr. is an internal business consultant for a Fortune 500 company, who writes about finance, culture, and design. He holds a Bachelor of Science in Communications from Ithaca College.

Although cigarette taxes are part of a multi-faceted approach to bring down the smoking rate, tax hikes in some states may not be enough to drive down the number of Americans who smoke. New statistics, from the Centers of Disease Control and Prevention (CDC), show that a lack of investment in state-run, anti-smoking programs may put an additional burden on health insurance programs in the coming decades.

Smoking is becoming an expensive habit. Admitting to nicotine on an application can increase health insurance and life insurance rates, while state and federal taxes add $2.35 or more to the cost of a single pack of cigarettes. In 2009, 14 states made it even more expensive to smoke, including:

  • Florida: The Sunshine State raised its state excise tax on cigarettes by $1 per pack, amid media speculation that lobbying efforts kept that amount from growing even larger
  • Connecticut and Rhode Island: Both states added $1 per pack to the cost of cigarettes, making smoking more expensive in those two states than anywhere else in the nation
  • North Carolina: Lawmakers in this state depend on tobacco revenue for a significant portion of their state's budget, but the increase weighed in at a modest ten cents after months of debate

Nationwide, the percentage of smokers has dropped from 42 percent in 1965 to under 19 percent in 2007.

States Don't Use Cigarette Taxes to Stop Smoking

Many lawmakers first approached the idea of hiking cigarette taxes as a public health initiative, suggesting that cash raised at the register could fund Quit Line programs and media campaigns. However, a stalled economy has forced many state governments to absorb tobacco surcharges into their general budgets, while freezing or suspending anti-tobacco efforts.

Meanwhile, the tobacco industry now spends over $9 billion per year to offset taxes through promotions and rebates that appeal to long-time smokers. Despite new minimum pricing rules established in some states, the CDC warns that economic pressure won't change smokers' behavior until states enact more targeted cessation programs.

Health Insurance Comparison Illustrates Benefits of Quitting

Where some states have seen limited success with cessation programs, health insurance companies may yet succeed. Despite the protests of the American tobacco lobby, most insurers have adopted the position that smokers routinely require advanced, expensive care in the final decades of their lives. Because smokers have higher instances of lung disease, cancer and related illnesses, they have fewer options for cheap health insurance. If you are looking for affordable health insurance or life insurance, you may need to give up tobacco and be able to prove it.