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North Carolina’s Lowest-in-the-Nation Cigarette Tax up in Smoke

1 min readBy: Curtis S. Dubay

North Carolina, which at $.05/pack had the lowest cigarette taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. in the country after Kentucky raised its $.03/pack tax to $.30 in 2005, raised its tax to $.30/pack last week. The tax will increase to $.35/pack in July 2006. From the Tuscaloosa News:

Lawmakers in North Carolina overcame decades of resistance this year to finally sign off on a state lottery and a sizable increase in the tax on cigarettes.

There was little doubt a tobacco tax increase would occur this year. It had been stuck at a nickel a pack since 1991, a rate that was the lowest in the nation after fellow tobacco-growing states Virginia and Kentucky raised their taxes – something tobacco-growing members of the Legislature almost wore as a badge of honor.

It will be interesting to see if North Carolina collects the increased amount of revenue it estimates the new tax will raise. Cigarette taxes are highly susceptible to border shopping because the cost of transporting them is low. See the Tax Foundation’s paper by Dr. Richard Wagner on border shopping and cigarettes.

Of states surrounding North Carolina, only will Georgia at $.37/pack will have a higher cigarette tax. Virginia and Tennessee’s tax is $.20/pack and South Carolina’s is $.07. See our data on excise taxes to learn more and compare your state’s excise taxAn excise tax is a tax imposed on a specific good or activity. Excise taxes are commonly levied on cigarettes, alcoholic beverages, soda, gasoline, insurance premiums, amusement activities, and betting, and typically make up a relatively small and volatile portion of state and local and, to a lesser extent, federal tax collections. .