Much of this new tax burden will be paid by low-income Americans. In itself, the fact that some excise taxes have regressive effects is not an argument against their collection – a system of user numbers or the internalization of significant externalities can be good policy – but it does show how important it is not to rely on regressive excise taxes for general fund revenues. It is also pointed out that trying to maximise revenue from excise duties can have negative effects. The dollar amount of tobacco tax revenues (combined at the federal and state levels) increased from $2 billion in 1955 to $12 billion in 1993. However, after adjusting for inflation, these figures show a decline: federal tobacco tax revenues have fallen dramatically from a peak of $9.5 billion (expressed in 1993 dollars) in 1963 to $5.5 billion in 1993. The decline in tobacco tax revenues reflects, in part, a steady decline in per capita cigarette consumption since the mid-1970s. However, the main reason for the decline in revenues is the federal government`s inability to adjust cigarette tax rates to keep pace with inflation. Figure 6-3 shows, for example, that the decline in federal tobacco tax revenues occurred despite the fact that total cigarette sales in 1993 and 1963 were almost identical. Due to inflation, declining consumption, and the identification of other sources of revenue, tobacco taxes, both at the federal and state levels, now account for a much smaller share of total revenues than they did 40 years ago.16 The results of a study41 that used national drug abuse surveys between 1974 and 1979 to estimate the impact of cigarette prices on smoking patterns in adolescents confirmed the 1981 finding of Lewit and colleagues that adolescent smoking behaviour is negatively attributable to cigarette prices.

The summary price elasticity of demand observed in this study of -0.76 for adolescents is also higher than that typically found for adults, meaning that adolescents respond better to price than adults. All 50 states, the District of Columbia, and 440 cities and counties levy taxes on cigarettes.5 (See Table 6-1.) In addition, 40 states levy taxes on tobacco products other than cigarettes. In 1921, Iowa became the first state to tax cigarettes; In 1969, North Carolina became the last state to introduce a cigarette tax.6 In addition to the excise tax on cigarettes, 43 states have general sales taxes that apply to cigarettes. In all but 43 states, the VAT base includes excise taxes, which add between 6 cents and 14 cents to the price of a pack of cigarettes.7 In addition, taxes on tobacco products should be increased over time to continue to have the desired effect of encouraging smoking cessation among current smokers and preventing vulnerable populations. Especially young people, from the beginning, to use these products. Programs that provide tobacco prevention and cessation services are expected to receive a significant portion of funding for all tobacco taxes, further protecting communities from tobacco exposure. Among developed countries in the world, the United States has one of the lowest tax rates on cigarettes (see Table 6-3). In two countries, taxes are now above $3 per package – Denmark ($3.48) and Norway ($3.11).

In the United States, the average federal and state tax on cigarettes in 1993 was 53 cents per pack. The combination of lower taxes on cigarettes and a higher standard of living (i.e. more money for goods) makes cigarettes much more affordable for Americans than for people in almost every other developed country. These three factors can help mitigate the decrease in smoking pleasure that some low-income individuals who face a tobacco tax increase may experience. It should also be noted that, on average, low-income smokers tend to respond to tobacco tax increases by reducing their cigarette consumption, rather than spending more on cigarettes and reducing their consumption of other goods. One study found that the lowest income quintile reduced cigarette consumption by an average of 1% for every 1% price increase. [21] This means that if prices were to rise, this group would spend the same total amount on fewer cigarettes (rather than spending more on the same number of cigarettes). Obviously, not all members of the group react in the same way. But to the extent that a person reduces their consumption or quits smoking altogether, their financial burden is less than if they continued to smoke at the same level after the tax was collected.

The question of whether youth react differently than adults to changes in tobacco prices is interesting for several reasons. First, as discussed in Chapter 1, the vast majority of adult smokers began their smoking career before the age of 21; Therefore, there is a good chance that people who have not started smoking at the age of 20 will never smoke. Second, in the long term, preventing people from starting to smoke is probably the most effective approach to reducing the health problems associated with smoking. Finally, there is good reason to believe that adolescents are more price sensitive than adults because they are less dependent on smoking (i.e. , they smoke fewer cigarettes per day) and have less disposable income (i.e., cigarettes are less affordable for them).37 A teen participating in a focus group organized under the auspices of the committee illustrated the impact of a cigarette tax increase as follows: «Major. Of course, they buy them from time to time, and they start thinking: the money runs out. No money to go to the movies, no money for gas or anything. Few studies have examined whether cigarette price increases affect teens differently than adults.38 In the United States, three studies have examined young people`s sensitivity to cigarette prices.

The largest of these studies used data from Cycle III of the Health Examination Survey, conducted between 1966 and 1970, to examine the effects of cigarette prices, advertising restrictions and sociodemographic factors on smoking behaviour in 5,308 adolescents aged 12 to 17. The study found that cigarette prices had a significant impact on adolescent smoking behaviour.39 In addition, the estimated price elasticity of demand observed among adolescents of -1.4 was about three times higher than that estimated for adults in a separate study by Lewit and Coate.40 [9] Community organizations only looked at how a higher cigarette tax would affect the number of smokers. His analysis did not model the health and budget effects of smokers who consumed fewer cigarettes. Therefore, CBO`s projected health gains are likely a lower limit for overall health gains. Increasing taxes on other tobacco products, such as cigars and smokeless tobacco, while not as widely studied, yields similar results in reducing prevalence and consumption. A study of the increase in the federal tax on smokeless tobacco in 2009 resulted in a decrease of at least 135,000 users immediately after the increase took effect. Therefore, it is important to tax all tobacco products, including e-cigarettes and products that have been granted modified risk status by the Food and Drug Administration, at a level high enough to deter teens from using tobacco. Only then can a differentiated tax structure help to promote the exit of adults. The American Lung Association strongly supports national, state, and local efforts to increase taxes on cigarettes and tobacco products.