Several states consider tobacco tax increases to fund health care programs, address budget deficits

Several states have sought to increase their tobacco taxes to fund health care programs and address budget deficits, but efforts to increase tobacco taxes in some cases have prevented the passage of health care proposals, the New York Times reports.

According to the Tobacco Merchants Association, in 2008, 22 state legislatures have considered bills that would increase tobacco taxes. Last year, 11 states enacted such legislation, according to the National Conference of State Legislatures. R.J. Reynolds Tobacco estimates that state tobacco taxes raise $14.5 billion in revenue annually and that the federal tobacco tax raises $7.3 billion in revenue annually.

"For some states, tobacco taxes are seen as a kind of magic bullet that are really quite different from less popular kinds of taxes," Richard Cauchi, a health policy analyst from the National Conference of State Legislatures, said, adding, "Legislators are able to argue that it's a sin tax, and the voters seem more accepting if they know the funds are going to be earmarked for some kind of health initiative."

Supporters of tobacco taxes maintain that they reduce the rate of smoking among children and increase revenue. However, opponents maintain that tobacco taxes are unfair for smokers and encourage illegal sales. In addition, they maintain that tobacco taxes are not a stable source of revenue because they lead to decreased sales.

Recent Efforts

The Massachusetts Legislature has considered a proposal that would increase the state tobacco tax by $1 per pack to $2.51 per pack to raise an estimated $175 million in additional revenue to help fund a subsidized health plan as part of a recently enacted health insurance law.

Earlier this month, the New York Legislature approved a proposal to increase the state tobacco tax by $1.25 per pack to $2.75 per pack to raise an estimated $265 million in additional revenue for the general fund, with some of the funds used to expand health insurance for children.

South Carolina this year "may offer the most intriguing test of whether the tobacco industry's might can be overcome by directly linking a tax increase to improvements in health care," according to the Times. The state Senate next month will debate a proposal that would increase the state tobacco tax by 50 cents per pack to 57 cents per pack to raise additional revenue to fund an expansion of public health insurance programs.

In California, a health care proposal supported by Gov. Arnold Schwarzenegger (R) and Assembly Speaker Fabian Nunez (D) failed in January "partly because of opposition to the $1.50-a-pack increase it included," the Times reports. Nunez said, "It's a lot of credit to give someone, but California right now would have the most comprehensive health care plan in the nation, and the tobacco industry basically killed it" (Sack, New York Times, 4/21).