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2009 - 2010 Proposed State Legislation for Tobacco Tax Increases

NCSL Health Program, updated May 19, 2010

Tobacco taxes continue to be a focus of attention for states in 2010, for two reasons:  raising state revenue and achieving public policy health goals such as discouraging tobacco use. At least 33 states considered legislation to increase tobacco taxes last year.1  Some states (Hawaii, Mississippi, New Hampshire, Oregon and South Carolina) had several bills pending, not all of which may be described below.  The bills vary regarding the proposed amounts of increase, their earmarked purposes and their fiscal impact on the state. Some measures include general revenue goals while others aim to fund health programs or change smoking habits.  

As of April 1, 2009, the average retail price per pack of cigarettes was boosted by 61.66 cents, plus tax increases in three states, for a new estimate of $4.82; this compares to $4.10 back on January 1.2   State tobacco tax collections for 2007 totaled $15,262,111,000 in the 50 states (not counting Washington, D.C., or local governments).  By comparison, state alcohol beverage taxes were $5.1 billion.3    

The state bills filed as of Feb. 3, 2009, were drafted before passage of the federal tobacco tax increase of 61.66 cents (for a federal tax total of $1.00 plus 0.66 cents) on Feb. 4, 2009. The federal law includes proportional increases for other tobacco products.  In general, state tobacco taxes are not tied to the federal tax rate. 


Federal Tax Increase: The congressional SCHIP bill signed by President Obama on Feb. 4, 2009, included an increase in the federal tobacco tax (mostly from an increase in the per pack of cigarettes federal tax, by 61.66 cents ) and other changes, which the Congressional Joint Committee on Taxation (JCT) estimated would increase budget revenue by $32.5 billion over five years and by $65.6 billion over 10 years.  Details of this federal tax structure are in an Appendix at the end of this report.

Example: Rhode Island cigarette costs as of April 10, 2009

 

 

 

 

 

 

 

 

 

 

 

 

 

State

Description; status  [yellow highlight = enacted into law)

Alabama
HB 134

Would increase the state portion of the excise tax on cigarettes from $.26 a pack to $.75 a pack.
(Filed 2/3/09; did not pass by end of regular session)

Arkansas
HB 1204

Increases the tax on cigarettes to $1.15 per pack and also raises the tax on other tobacco products - such as cigars and pipe and chewing tobacco - from 32 percent of the wholesale price to 68 percent.  Effective March 1, 2009.
(Filed 1/26/09; passed House 75y-24n, 2/5/09; passed Senate 28y-7n, 2/12/09; signed into law by governor as Act 180 of 2009. News release 2/2009

California
AB 89,
SB 600

Would impose an additional excise tax on the distribution of cigarettes; at the rate of $0.105 for each cigarette distributed ($1.05 per pack of 20).
(Filed 1/5/09; SB 600 favorable Senate report; held in Senate committee 9/6/09)
Colorado
HB 1342		 Would eliminate the state sales and use tax exemption for cigarettes, beginning July 1, 2009. Final version maintains the sales and use tax exemption for cigarettes for counties, towns, cities and special districts.  The tax would sunset June 30, 2011.
(Passed House; passed Senate; conference report passed 5/4/09; did not pass final vote 5/6/09)

Florida
HB 11, HB 15a,
HB 887, HB 7a, SB 1172,

Would increase the amount of the cigarette user fee. Requires that revenue derived from the fee be allocated to specified trust funds, entities, and medical programs including, among other things, specified cancer research and treatment centers, medical residency and fellowship programs, recruitment of cancer researchers and research teams, the state Kidcare program, and research on tobacco-related illnesses.
(Filed in House 12/30/08; referred to House councils 3/9/09; did not pass by end of regular session)

Georgia
HB 39

 

Would increase the excise tax on cigarettes from 37 cents to $1.37 and increase the tax on loose or smokeless tobacco from 10 percent to 25 percent of the wholesale cost price.
(Filed 1/12/09; sent to House Ways & Means 2/2/09; did not pass; may be carried over to 2010)

Hawaii
HB 895,
SB 38


Hawaii
HB 1175

Would increase the tobacco tax on tobacco products other than cigarettes from 40 percent to 60 percent of the wholesale price and deposit 33.3 percent of the proceeds collected into the community health centers special fund.
(Filed 1/28/09; sent to House Committee On Health; passed Committee on Health; sent to Committee on Ways and Means, 3/27/09)
 Increases the per-cigarette tax phased in over three years, as follows:  From 11 cents to 13 cents beginning on July 1, 2009; from 12 cents to 14 cents beginning on July 1, 2010; and from 13 cents to 15 cents beginning on July 1, 2011, a total increase of 80 cents per pack of 20 cigarettes.
(Filed 1/09; signed into law by governor as Act 56 of 2009, 5/7/09)

Illinois
SB 44

 

Would amend the Cigarette Tax Act and the Cigarette Use Tax Act, by imposing an additional tax of 50 mills per cigarette ($1.00 per pack) on retailers of cigarettes. Also would require that, of the proceeds, 99.43 percenet be deposited in the Healthcare Provider Relief Fund and 0.57 percent be deposited in the Tax Compliance and Administration Fund. It is "expected to generate an additional $175 million in revenue for FY 2010 and 2011."
(Filed 1/30/09; passed Senate 4/1/09; in House)
 Kansas
 HB 2327  		 Would increase cigarette excise tax to $1.54 on each 20 pack. (Filed 1/09; did not pass in 2009 ssssion; may be carried over to 2010)
 Kentucky
 HB 68		  Would increase state cigarette taxes by 70 cents (to $1.00 total); also would increase the rate on other tobacco products from 7.5 percent to 10 percent and set the rate on snuff product taxes at 20 cents per unit, effective Aug. 1, 2009.  The change is estimated to increase revenue by $178.5 million in FY 2009-10. (HB 68 filed and sent to committee 1/7/09)

Kentucky
HB 144

Increases the cigarette tax to 60 cents a pack from 30 cents; double current taxes on snuff and other tobacco products.  Initial revenue estimate (with alcohol tax): $52 million the rest of fiscal 2009 and $159 million in 2009-10. [text]   Effective date April 1, 2009.
(HB 144 filed; passed House 66y-34n, 2/11/09; passed Senate 24y12n, 2/13/09; signed into law by governor 2/13/09)
News article: KY: House approves raising alcohol, tobacco taxes - The Courier-Journal (Louisville) 2/11/09.
 Maine
 HB 948		 Would increase the cigarette tax by $1.00 (from $2 to $3)
(Filed 3/30/09; did not pass committee 5/8/09; may be carried over to 2010)

Mississippi
HB 40, HB 105,
HB 165, HB 354, SB 2053

Relates to Medicaid; would increase the excise tax on cigarettes; provides that the tobacco tax law does not apply to interstate sales of tobacco.
HB 165: Would increase the excise tax on tobacco.
(HB 105: Filed: 1/2/09; From House Committee On Medicaid: Do Pass With Substitute; did not pass Conference Committee, 4/1/09)
(HB 165: Failed to pass committee, 2/25/09)

Missouri
HB 494

Would increase the tax on cigarettes by $.16 per pack, with revenue to be deposited in the state general revenue fund.
(Filed 1/29/09; did not pass in 2009 regular session; may be carried over to 2010))

Montana
SB 317, D 1341

Would increase non-cigarette tobacco taxes and cigarette tax on 20 pack by 17 cents (from $1.70 to $1.87).
(Filed & sent to Senate Committee On Taxation 1/30/09; D 1341 did not pass )
Nevada
A 255		 Would increase the tax on tobacco products tax by $1.00 on pack of cigarettes (from $0.80 to $1.80); provides for use of the additional tax proceeds to expand certain health care delivery programs.
(Filed and sent to committee 3/6/09; held in committee; did not pass 2009 regular session)

New Hampshire
HB 567,
HB 638

HB 567 would redefine tobacco products for purposes of the tobacco tax,  increasing the tax on tobacco products other than cigarettes; also would establish a tobacco use prevention and cessation program fund to be administered by the Department of Health and Human Services; designating the increase in the tax to such fund; specifies that 10 percent of moneys in the fund be used for a youth tobacco use prevention and empowerment program.
H.B. 638, would increase the tobacco tax and dedicates certain tobacco tax revenues to the comprehensive cancer plan fund.
(HB 567: Filed & sent to House Committee On Ways And Means, 1/8/09; Failed to pass House, 3/24/09)
(HB 638: Filed 1/8/09; did not pass in 2009; carried over to 2010)
New Jersey
FY10 Budget		  The FY 2010 budget would raise state tax for cigarettes an additional 12.5 cents, estimated to raise $26 million annually.  Funds from the cigarette tax are earmarked for tobacco control programs.      [News article]
(Filed 2/09; in committee 4/2/09)
New Mexico
H 742		 Would increase the cigarette excise tax rate by $1.00 on a pack of 20 cigarettes (from $0.91 to $1.91)
(Filed 2/12; favorable committee report 2/26/09; did not pass in 2009 regular session)

New York
AB 3300, AB 8028, SB 4036

Would increase the state tax on a pack of cigarettes from $2.75 (the rate established in 2008) to $3.50.
(Filed & sent to committee on Ways and Means, 1/26/09; held in committee as of 9/6/09)
North Carolina
HB 640		 Would increase the state tobacco tax by 75 cents, from 35 cents to $1.10 per pack of 20 cigarettes, with new funds earmarked for the Trust Fund for Mental Health, Developmental Disabilities, and Substance Abuse Services and Bridge Funding Needs; the remaning funds would go to the state General Fund.
(Filed & sent to Comm., 3/18/09; held in committee; did not pass 2009 regular session)

Oregon
HB 2009,
HB 2018,
HB 2075,
HB 2122,
HB 2369,
HB 3387


Oregon
HB 2672

Would increase the cigarette tax; appropriating funds from the increase to transportation services for elderly individuals and individuals with disabilities.
(HB 2075: Filed 1/12/09; sent to committee on Transportation, 1/15/09)
(HB 2122: Filed 1/15/09; sent to committee on Health Care, 1/22/09; HB 3387 filed 3/12/09; bills did not pass by end of regular session)

 
HB 2672 Increases the rate of tax on the distribution of moist snuff and smokeless tobacco. The suggested rate of taxation based on weight is at $1.78 per ounce, and the minimum of $2.14 per can. The new rate is revenue neutral, where it generates more revenue over the period of the three coming biennia, and reduced revenue collection after that and before the indexing takes affect in 2019.
(Filed 1/09'; signed into law by governor as Chapter 717, 8/20/09)
Article: Bill boosts taxes on smokeless tobacco. House Bill 2672, which cleared the Senate without change on a 21-9 vote, sets a minimum tax of $2.14 on a 1.2-ounce can. Each additional ounce would be taxed $1.78. The tax would raise $5.5 million... more... 6/16/09.

Pennsylvania
HB 57

Would imposed a tax on the tobacco product wholesale price; at the rate of 59.2% of the wholesale price of the tobacco product.
(Filed 1/26/09; held in House committee as of 9/5/09)
Rhode Island
HB 5019		 The FY 2010 budget increases thetobacco products tax from $2.46 per pack of 20 cigarettes to $3.46 per pack.
(Passed House, passed Senate and sent to governor 4/2/09; became law without governor's signature as Public Law No. 2009-5, 4/10/09)

South Carolina
HB 3014,
HB 3119,
HB 3206,
HB 3211

Would impose a surtax on cigarettes, increasing from 7 cents to $1.00 (in HB 3211) or to 44 cents (in HB 3014) or to 37 cents (in HB 2119) or to 32 cents (in HB 3206) per pack; with funds used for various programs including the Medicaid Trust Fund and the Health Care Access Trust Fund; also providing for additional coverage for the state children's health insurance program and the health care premium assistance program.
(Filed & sent to Ways and Means Committee 1/13/09; did not pass in 2009 regular session; may be carried over to 2010)

South Dakota - 
HB 1252

Reallocates tobacco tax revenues; removing earmarking for education purposes only, thus allowing increased use of funds for health or general purposes.  (Not an actual tax increase)
(Filed 02/02/2009 - Referred to House Committee On State Affairs; signed into law by governor, 3/13/09)
Utah
SB 114, (2009)
HB 219 (2009
SB259 (2010)
HB196 (2010)

S 114 would increase the tax on cigarette packs by $1.305, from the current 69.5 cents to $2.00.
H 219 would increase the tax on cigarette packs by $1.00, from 69.5 cents to $1.695.
(Filed 1/26/09; did not pass 3/12/09)

SB259, Christensen - "Amendments to Tobacco Tax"
HB196, Ray - "Tobacco Tax Revisions"
(Became law without governor's signature, 3/31/10)
Vermont
HB 401		 Would increase cigarette excise tax $2.01 (from $1.99 to $4.00)
(Filed 1/09; did not pass committees by end of 2009 session; may be carried over to 2010)

Virginia
HB 1347, HB 2249


Virginia
HB 2379,
HB 2389, S 947

Would allow local counties to tax cigarettes up to $.05.
(Status: did not pass in 2008; subject to carryover to 2009)
H 2379 would  increase cigarette tax on pack of 20 cigarettes 89 cents (from 30 cents to $1.19. IS 947 would increase cigarette tax from 30 cents to 60 cents a 20-pack
(Filed  1/09; did not pass committees in 2009 session)
Washington
SB 5626		 Would increase state tax on 20 pack of cigarettes by $1 (from $2.025 to $3.025)
(Filed and sent to comittee 1/27/09; did not pass in 2009 session; may be carried over to 2010)
West Virginia
HB 2681
HB 2746
SB 420		 HB 2681 would increase the state cigarette excise tax $.80 on a 20 pack (from $0.55 to $1.35).
HB 2746 would increase the state cigarette excise tax from $.55 to $1.20 on a 20-pack of cigarettes.
SB 420 would increase cigarette excise tax by $.65 ($.55 to $1.20).
(Filed & sent to Comm. 2/23/09;  did not pass committees in 2009 session)
Wyoming
HB 224		  Would increase the cigarette tax from $.60 per pack to $1.10 per pack, with estimated potential revenue of $21.2 million annually.
(Filed  1/09; did not pass in 2009 regular session)
 

Notes:
2 -The average price estimate includes statewide sales taxes but not local cigarette or sales taxes; it does include New York City's $1.50 per pack cigarette tax. 
Source: State Cigarette Excise Tax Rates, by Campaign for Tobacco Free Kids, updated 4/7/2009.
3 - The US Census Bureau, "State Government Tax Collections: 2007", published 2/28/08

The bill list above includes information from NCSL state research by the Health Program and the Fiscal Program as well as 50-state searches from Lexis-Nexis and StateNet.

State Legislative Intent - one example from Florida (House Bill 11 of 2009)

Section 1. The Legislature finds that cigarette consumption dramatically impacts the state's Medicaid budget and a substantial deficit has been created between what consumers pay in related excise or privilege fees and what the state actually incurs in health care costs. The Legislature further finds that the imposition of a user fee on cigarettes should at least be commensurate with the projected governmental costs associated with the consumption of cigarettes. The Legislature further finds that revenues derived from such user fees should apply to health care, with an emphasis given to measures for which there is a connection between cigarette consumption and the user fee revenue generated from the consumption of cigarettes.

 

Related Resources

State tobacco cessation programs - a  compilation of resources specific to quitting tobacco use.  Published 2009.
 

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APPENDIX: Federal Tobacco Taxes in Detail

The following information was compiled by the Congressional Research Service in a report Jan. 14, 2009; edited to reflect the final version of the law.
http://assets.opencrs.com/rpts/R40130_20090114.pdf

(Federal) Tobacco Excise Taxes
The vast majority of tobacco taxes are on cigarettes, which account for 97 percent of federal tobacco tax revenue. Under current law, excise taxes on cigarettes and other tobacco products include the following rates:

  • federal cigarette taxes: $0.39 per pack;
  • small cigars: $.04 per package of 20;
  • large cigars: 20.719% of sales price, not to exceed $48.75 per 1,000 units (i.e., a maximum tax of almost $.05 cents per cigar);
  • chewing tobacco: $.01 per ounce;
  • snuff: $.04 cents per ounce; and
  • pipe and roll-your-own tobacco: $.07 cents per ounce.
  • There are also taxes on cigarette paper and cigarette tubes. These taxes are imposed per pound and the rates are as follows: (1) $0.195 for chewing tobacco, (2) $0.585 for snuff, and (3) $1.0606 for pipe and roll-your-own tobacco.
  • There are also taxes on large cigarettes that are essentially non-existent (although a tax is necessary for administrative reasons).

CHIPRA 2009 will increase taxes on cigarettes and tobacco-related products (effective April 1, 2009) to the following rates:

  • federal cigarette taxes would be increased to $1.00 and .66 cents per pack;
  • small cigars would have their taxes immediately increased to the same level as cigarettes: $1.0066 per pack, an increase of $.97.
    (The House of Representatives passed version of January 2009 had a gradual increase of $0.25 per pack in 2009-2010, $0.50 in 2011-2012, $0.75 in 2013-2014, and $1.00 in 2015 and thereafter;
  • large cigars would be subject to a tax of 52.75% of sales price with a maximum of $0.4026 per cigar;   [2/12/09 update]
  • chewing tobacco would be increased to approximately $.03 cents per ounce (and $0.50 per pound);
  • snuff would be increased to $.113 per can ($1.51 per pound);   [2/12/09 update]
  • pipe tobacco would be increased to $.18 per ounce ($2.8126 per pound);
  • roll-your-own tobacco (RYO) would be increased to $1.53 per ounce ($24.78 per pound). The definition of roll–your-own tobacco would be expanded to include tobacco that could be used to make cigars. The large increase in roll-your-own tobacco reflects concerns that this tobacco might substitute for cigarettes;
  • cigarette papers taxes would rise from $1.22 per 40, to $3.13;
  • cigarette tubes would rise from $2.44 to $6.26.
     
Compiled by Richard Cauchi, with material from Arturo Perez, Karmen Hanson, Amy Winterfeld and Alise Garcia. 

 

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