Cigarette Taxes on the Increase in Texas

Without ceremony, Governor Rick Perry of Texas recently signed legislation to increase the cigarette tax in the Lone Star State.

From State Tax Today: (subscription required)

“Texas Gov. Rick Perry (R) has signed legislation to increase the state’s cigarette tax by $1 per pack effective January 1, 2007. The tax is currently 41 cents per pack.

HB 5, sponsored by Rep. Peggy Hamric (R), was signed as the last part of a five-bill package approved by Texas lawmakers in a special session in May to reduce local school property taxes and overhaul the state’s public school finance plan to comply with a Texas Supreme Court mandate.

Perry held public ceremonial signings for several bills in the package and other measures approved during the special session, but not for HB 5, a spokeswoman said.”

As stated above, Texas’ cigarette tax is currently 41 cents per pack. That rate is among the lowest in the nation, but after the $1.00 per pack tax increase, Texas will rank 10th highest nationally – just behind New York and Massachusetts. Our own Patrick Fleenor wrote a recent commentary that shows Texas’ cigarette tax increase will lead to additional cigarette smuggling and tax evasion.

To read additional Tax Foundation commentary that provides an analysis of Texas’ cigarette tax increase, property tax reform and new business tax, click here.