Taxes on Tobacco Products

Tax policy experts with the Tax Foundation’s Center for State Tax Policy, including Ulrik Boesen, Senior Policy Analyst who specializes in excise taxes, continue to provide leading research and analysis of proposals to tax tobacco products at the federal and state levels. We also explored the issue of excise taxes on new and existing markets as part our State Tax Policy Boot Camp. You can watch the webinar here.

Below are a collection of our most recent primers and blog posts regarding tobacco tax proposals.

 

Four Issues with Proposal to Increase Tobacco and Vapor Taxes in Maine

April 13, 2021

Maine's proposal to increase tobacco and vapor taxes has at least four major issues: flawed revenue allocation, risk of increased smuggling, regressivity, and violation of the harm reduction principle.

How High Are Vapor Taxes in Your State?

April 7, 2021

Several states are considering introducing or increasing taxes on vapor products to make up declining tax revenue from traditional tobacco products or to fill budget holes in the wake of the coronavirus pandemic. However, lawmakers should approach the issue carefully because flawed excise tax design on vapor products could drive consumers back to more harmful combustible products like cigarettes.

Why Smoking and Vaping Tax Increases Should Not be Part of West Virginia’s Reform Proposals

April 5, 2021

In West Virginia, both Senate Republicans and Gov. Justice have offered proposals for reductions to the state’s income tax. In both of the proposals, excise taxes on tobacco and nicotine products are part of the pay-fors that are supposed to make up revenue lost due to lower income tax rates.

Washington State Lawmakers Consider 1,000% Tax Increase on Tobacco Businesses

March 19, 2021

Limiting addiction to nicotine is a laudable goal, but lawmakers should exercise caution with the methods employed. Using gross receipts taxes on businesses to effectively levy an excise tax introduces complexity to an already flawed tax design. It is better to let the excise tax internalize externalities and the business tax raise general revenue.

Excise Tax Application and Trends

March 16, 2021

The excise tax family is growing. Over the last decade, several products have become subject to excise taxes or are in the process of becoming so. Given this development, it is more crucial than ever that lawmakers, businesses, and consumers understand the possibilities and, more importantly, limitations of excise tax application.

Smoking High Excise Taxes on Vapor Products Could Be Coming to West Virginia

February 18, 2021

West Virginians would face extraordinarily high taxes on vapor products in state if Senate Bill 68 becomes law. The bill would increase taxes on liquid used in vapor products from 7.5 cents per milliliter (ml) to $1 per ml—an increase of over 1,300 percent.

Tax-A-Rama in Maryland

February 9, 2021

The potential override of Gov. Larry Hogan’s (R) veto of a digital advertising tax (HB732) looms large over the current legislative session in Maryland, though it is only one of many tax proposals under consideration in the state.

Washington State Lawmakers Considering New Bans and Higher Taxes on Nicotine Products

February 1, 2021

Washington state lawmakers have proposed a bill that would make it the second state to ban all flavored tobacco and the first to impose a nicotine cap on vapor products, and would increase taxes on vapor to among the highest in the nation.

Massachusetts Flavored Tobacco Ban Has Severe Impact on Tax Revenue

January 19, 2021

The Massachusetts flavored tobacco ban highlights the complications of contradictory tax and regulatory policy, the instability of excise taxes that go beyond pricing in the cost of externalities, and the public risks of driving consumers into the black market through excessive taxation or regulation.

Indiana Lawmakers Consider Cigarette Tax Increase

December 1, 2020

While increasing taxes on cigarettes may limit demand, a 200 percent hike may also result in a number of unintended consequences, such as increased smuggling.

New York Lawmaker Looks to Sin Taxes Once More

November 24, 2020

New York already suffers from significant smuggling of untaxed tobacco products—smuggled cigarettes accounted for 53 percent of cigarettes consumed in the state in 2018—and further increasing tobacco taxes is likely to make matters worse.

Cigarette Taxes and Cigarette Smuggling by State, 2018

November 24, 2020

Excessive tax rates on cigarettes in some states induce substantial black and gray market movement of tobacco products into high-tax states from low-tax states or foreign sources. New York has the highest inbound smuggling activity, with an estimated 53.2 percent of cigarettes consumed in the state deriving from smuggled sources.

Taxation of Tobacco and Vapor Products on the Ballot in Oregon

October 7, 2020

Oregon's Measure 108 introduces a risk of increased tax avoidance and evasion activity as consumers of the products often procure cigarettes from lower tax jurisdictions. At $3.33 per pack, Oregon would have the highest excise tax on cigarettes in the region.

Massachusetts Ban of Flavored Cigarettes Is Getting Expensive

August 3, 2020

Aside from public health concerns, a ban on flavored tobacco, especially when including cigarettes, has significant tax implications and could result in unintended consequences such as increased smuggling. In Massachusetts, more than 20 percent of cigarettes smoked are purchased out of state.

Cigarette Taxes in Europe

July 16, 2020

Ireland and the United Kingdom levy the highest excise duties on cigarettes in the European Union (EU), at €8.00 ($8.95) and €6.83 ($7.64) per 20-cigarette pack, respectively. This compares to an EU average of €3.22 ($3.61). Bulgaria (€1.80 or $2.01) and Slovakia (€2.07 or $2.32) levy the lowest excise duties.

Michigan Vapor Tax Bill Gets It Half-Right

June 18, 2020

In line with the nationwide trend of taxing vapor products, the Michigan Senate has passed a new 18 percent tax on vapor products. These taxes are often intended to achieve a two-fold goal: deterring youth use and raising revenue. The Michigan bill is no exception.

Colorado Tobacco Tax Bill Includes Positive Change

June 11, 2020

While it is understandable that lawmakers and organizers are worried about Colorado’s financial situation, they should remember that narrow taxes are volatile and disrupt markets. Excise taxes can play a role in state revenues even as policymakers appreciate that excise taxes are not viable long-term revenue tools for general spending priorities.

How High Are Vapor Taxes in Your State?

June 3, 2020

Many states may be looking toward vapor and other excise taxes to fill budget holes caused by the coronavirus crisis. While those areas may represent untapped revenue sources for many states, taxing those activities is unlikely to raise much revenue in the short term.

Can States Close Budget Deficits with Excise Tax Hikes?

April 15, 2020

We examine whether excise taxes are a solution to budget deficits, and while the short answer to that question is no, there are of course nuances. Excise taxes can play a role in state revenues even as policymakers appreciate that excise taxes are not viable long-term revenue tools for general spending priorities.

What Happens with State Excise Tax Revenues During a Pandemic?

March 25, 2020

States will have to consider the effects of the COVID-19 pandemic on their excise tax revenues, including from gas taxes, tobacco taxes, and alcohol taxes.

Excise Taxes on Vapor Products Are Trending

March 11, 2020

While lawmakers are working through the design of vapor tax proposals, they must thread the needle between protecting adult smokers’ ability to switch and barring minors’ access to nicotine products. A good first step is creating appropriate definitions for the new nicotine products to avoid unintended disproportionate taxation based on design differences or bundling.

Maryland Legislature Seeks Revenue with Risky Proposals

February 26, 2020

One notable consequence of high state tobacco excise tax rates is increased smuggling as people procure discounted products from low-tax states and sell them in high-tax states. Smugglers wouldn’t have to look far to find cheaper smokes. All of Maryland’s neighboring states have rates lower than $4 per pack, including Virginia ($1.20) and West Virginia ($0.30). Such an increase would impact the many small business owners operating vape shops around the state and convenience stores relying heavily on vapers as well as tobacco sales.

Banning Flavored Tobacco Could Have Unintended Consequences

February 12, 2020

The prospect of a ban on flavored tobacco and nicotine products highlights the complications of contradictory tax and regulatory policy, the instability of excise taxes that go beyond pricing in the cost of externalities, and the public risks of driving consumers into the black market through excessive taxation or regulation.

Taxing Nicotine Products: A Primer

January 22, 2020

New nicotine products, along with a greater consciousness about the dangers of smoking, have prompted millions to give up smoking. This has contributed to federal and state excise tax collections on tobacco products declining since 2010. Our new report outlines the best way to tax nicotine products based on health outcomes and revenue stability.

Virginia Governor Looks to Excise Taxes

December 23, 2019

The proposed budget reflects a growing trend as policymakers across the country look to excise taxes as long-term solutions to budget woes. While excise taxes can be a part of the revenue picture, they are not a sustainable revenue source due to their narrow base, which is easily affected by changes in consumer behavior or market conditions.

Cigarette Taxes in Europe

August 22, 2019

Today, Ireland and the United Kingdom levy the highest excise duties on cigarettes in the European Union (EU), at €7.57 (US $8.93) and €6.57 ($7.75) per 20-cigarette pack, respectively. This compares to an EU average of €3.09 ($3.64). In contrast, Bulgaria (€1.76 or $2.07) and Hungary (€1.96 or $2.31) levy the lowest excise duties.

How High Are Cigarette Taxes in Your State?

April 10, 2019

Cigarette taxes around the country are levied on top of the federal rate of $1.0066 per 20-pack of cigarettes. As of 2016, taxes accounted for almost half of the retail cost of a pack of cigarettes.

How Stable is Cigarette Tax Revenue?

May 3, 2021

This web tool allows taxpayers to see how cigarette tax revenues have changed since 1955. Across almost all states, a clear pattern of volatility emerges. Tax rate hikes are met with a momentary bump in revenue, followed by a falloff.

Four Issues with Proposal to Increase Tobacco and Vapor Taxes in Maine

April 13, 2021

Maine's proposal to increase tobacco and vapor taxes has at least four major issues: flawed revenue allocation, risk of increased smuggling, regressivity, and violation of the harm reduction principle.

Why Smoking and Vaping Tax Increases Should Not be Part of West Virginia’s Reform Proposals

April 5, 2021

In West Virginia, both Senate Republicans and Gov. Justice have offered proposals for reductions to the state’s income tax. In both of the proposals, excise taxes on tobacco and nicotine products are part of the pay-fors that are supposed to make up revenue lost due to lower income tax rates.

Washington State Lawmakers Consider 1,000% Tax Increase on Tobacco Businesses

March 19, 2021

Limiting addiction to nicotine is a laudable goal, but lawmakers should exercise caution with the methods employed. Using gross receipts taxes on businesses to effectively levy an excise tax introduces complexity to an already flawed tax design. It is better to let the excise tax internalize externalities and the business tax raise general revenue.

Excise Tax Application and Trends

March 16, 2021

The excise tax family is growing. Over the last decade, several products have become subject to excise taxes or are in the process of becoming so. Given this development, it is more crucial than ever that lawmakers, businesses, and consumers understand the possibilities and, more importantly, limitations of excise tax application.

Smoking High Excise Taxes on Vapor Products Could Be Coming to West Virginia

February 18, 2021

West Virginians would face extraordinarily high taxes on vapor products in state if Senate Bill 68 becomes law. The bill would increase taxes on liquid used in vapor products from 7.5 cents per milliliter (ml) to $1 per ml—an increase of over 1,300 percent.

Tax-A-Rama in Maryland

February 9, 2021

The potential override of Gov. Larry Hogan’s (R) veto of a digital advertising tax (HB732) looms large over the current legislative session in Maryland, though it is only one of many tax proposals under consideration in the state.

Washington State Lawmakers Considering New Bans and Higher Taxes on Nicotine Products

February 1, 2021

Washington state lawmakers have proposed a bill that would make it the second state to ban all flavored tobacco and the first to impose a nicotine cap on vapor products, and would increase taxes on vapor to among the highest in the nation.

Massachusetts Flavored Tobacco Ban Has Severe Impact on Tax Revenue

January 19, 2021

The Massachusetts flavored tobacco ban highlights the complications of contradictory tax and regulatory policy, the instability of excise taxes that go beyond pricing in the cost of externalities, and the public risks of driving consumers into the black market through excessive taxation or regulation.

Indiana Lawmakers Consider Cigarette Tax Increase

December 1, 2020

While increasing taxes on cigarettes may limit demand, a 200 percent hike may also result in a number of unintended consequences, such as increased smuggling.

New York Lawmaker Looks to Sin Taxes Once More

November 24, 2020

New York already suffers from significant smuggling of untaxed tobacco products—smuggled cigarettes accounted for 53 percent of cigarettes consumed in the state in 2018—and further increasing tobacco taxes is likely to make matters worse.

Cigarette Taxes and Cigarette Smuggling by State, 2018

November 24, 2020

Excessive tax rates on cigarettes in some states induce substantial black and gray market movement of tobacco products into high-tax states from low-tax states or foreign sources. New York has the highest inbound smuggling activity, with an estimated 53.2 percent of cigarettes consumed in the state deriving from smuggled sources.

Taxation of Tobacco and Vapor Products on the Ballot in Oregon

October 7, 2020

Oregon's Measure 108 introduces a risk of increased tax avoidance and evasion activity as consumers of the products often procure cigarettes from lower tax jurisdictions. At $3.33 per pack, Oregon would have the highest excise tax on cigarettes in the region.

Massachusetts Ban of Flavored Cigarettes Is Getting Expensive

August 3, 2020

Aside from public health concerns, a ban on flavored tobacco, especially when including cigarettes, has significant tax implications and could result in unintended consequences such as increased smuggling. In Massachusetts, more than 20 percent of cigarettes smoked are purchased out of state.

Michigan Vapor Tax Bill Gets It Half-Right

June 18, 2020

In line with the nationwide trend of taxing vapor products, the Michigan Senate has passed a new 18 percent tax on vapor products. These taxes are often intended to achieve a two-fold goal: deterring youth use and raising revenue. The Michigan bill is no exception.

Colorado Tobacco Tax Bill Includes Positive Change

June 11, 2020

While it is understandable that lawmakers and organizers are worried about Colorado’s financial situation, they should remember that narrow taxes are volatile and disrupt markets. Excise taxes can play a role in state revenues even as policymakers appreciate that excise taxes are not viable long-term revenue tools for general spending priorities.

How High Are Vapor Taxes in Your State?

June 3, 2020

Many states may be looking toward vapor and other excise taxes to fill budget holes caused by the coronavirus crisis. While those areas may represent untapped revenue sources for many states, taxing those activities is unlikely to raise much revenue in the short term.

What Happens with State Excise Tax Revenues During a Pandemic?

March 25, 2020

States will have to consider the effects of the COVID-19 pandemic on their excise tax revenues, including from gas taxes, tobacco taxes, and alcohol taxes.

Excise Taxes on Vapor Products Are Trending

March 11, 2020

While lawmakers are working through the design of vapor tax proposals, they must thread the needle between protecting adult smokers’ ability to switch and barring minors’ access to nicotine products. A good first step is creating appropriate definitions for the new nicotine products to avoid unintended disproportionate taxation based on design differences or bundling.

Maryland Legislature Seeks Revenue with Risky Proposals

February 26, 2020

One notable consequence of high state tobacco excise tax rates is increased smuggling as people procure discounted products from low-tax states and sell them in high-tax states. Smugglers wouldn’t have to look far to find cheaper smokes. All of Maryland’s neighboring states have rates lower than $4 per pack, including Virginia ($1.20) and West Virginia ($0.30). Such an increase would impact the many small business owners operating vape shops around the state and convenience stores relying heavily on vapers as well as tobacco sales.

Banning Flavored Tobacco Could Have Unintended Consequences

February 12, 2020

The prospect of a ban on flavored tobacco and nicotine products highlights the complications of contradictory tax and regulatory policy, the instability of excise taxes that go beyond pricing in the cost of externalities, and the public risks of driving consumers into the black market through excessive taxation or regulation.

Taxing Nicotine Products: A Primer

January 22, 2020

New nicotine products, along with a greater consciousness about the dangers of smoking, have prompted millions to give up smoking. This has contributed to federal and state excise tax collections on tobacco products declining since 2010. Our new report outlines the best way to tax nicotine products based on health outcomes and revenue stability.

Virginia Governor Looks to Excise Taxes

December 23, 2019

The proposed budget reflects a growing trend as policymakers across the country look to excise taxes as long-term solutions to budget woes. While excise taxes can be a part of the revenue picture, they are not a sustainable revenue source due to their narrow base, which is easily affected by changes in consumer behavior or market conditions.

How High Are Cigarette Taxes in Your State?

April 10, 2019

Cigarette taxes around the country are levied on top of the federal rate of $1.0066 per 20-pack of cigarettes. As of 2016, taxes accounted for almost half of the retail cost of a pack of cigarettes.

How Stable is Cigarette Tax Revenue?

May 3, 2021

This web tool allows taxpayers to see how cigarette tax revenues have changed since 1955. Across almost all states, a clear pattern of volatility emerges. Tax rate hikes are met with a momentary bump in revenue, followed by a falloff.

Excise Tax Application and Trends

March 16, 2021

The excise tax family is growing. Over the last decade, several products have become subject to excise taxes or are in the process of becoming so. Given this development, it is more crucial than ever that lawmakers, businesses, and consumers understand the possibilities and, more importantly, limitations of excise tax application.

Excise Taxes on Vapor Products Are Trending

March 11, 2020

While lawmakers are working through the design of vapor tax proposals, they must thread the needle between protecting adult smokers’ ability to switch and barring minors’ access to nicotine products. A good first step is creating appropriate definitions for the new nicotine products to avoid unintended disproportionate taxation based on design differences or bundling.

Banning Flavored Tobacco Could Have Unintended Consequences

February 12, 2020

The prospect of a ban on flavored tobacco and nicotine products highlights the complications of contradictory tax and regulatory policy, the instability of excise taxes that go beyond pricing in the cost of externalities, and the public risks of driving consumers into the black market through excessive taxation or regulation.

Taxing Nicotine Products: A Primer

January 22, 2020

New nicotine products, along with a greater consciousness about the dangers of smoking, have prompted millions to give up smoking. This has contributed to federal and state excise tax collections on tobacco products declining since 2010. Our new report outlines the best way to tax nicotine products based on health outcomes and revenue stability.

Four Issues with Proposal to Increase Tobacco and Vapor Taxes in Maine

April 13, 2021

Maine's proposal to increase tobacco and vapor taxes has at least four major issues: flawed revenue allocation, risk of increased smuggling, regressivity, and violation of the harm reduction principle.

Why Smoking and Vaping Tax Increases Should Not be Part of West Virginia’s Reform Proposals

April 5, 2021

In West Virginia, both Senate Republicans and Gov. Justice have offered proposals for reductions to the state’s income tax. In both of the proposals, excise taxes on tobacco and nicotine products are part of the pay-fors that are supposed to make up revenue lost due to lower income tax rates.

Washington State Lawmakers Consider 1,000% Tax Increase on Tobacco Businesses

March 19, 2021

Limiting addiction to nicotine is a laudable goal, but lawmakers should exercise caution with the methods employed. Using gross receipts taxes on businesses to effectively levy an excise tax introduces complexity to an already flawed tax design. It is better to let the excise tax internalize externalities and the business tax raise general revenue.

Excise Tax Application and Trends

March 16, 2021

The excise tax family is growing. Over the last decade, several products have become subject to excise taxes or are in the process of becoming so. Given this development, it is more crucial than ever that lawmakers, businesses, and consumers understand the possibilities and, more importantly, limitations of excise tax application.

Smoking High Excise Taxes on Vapor Products Could Be Coming to West Virginia

February 18, 2021

West Virginians would face extraordinarily high taxes on vapor products in state if Senate Bill 68 becomes law. The bill would increase taxes on liquid used in vapor products from 7.5 cents per milliliter (ml) to $1 per ml—an increase of over 1,300 percent.

Tax-A-Rama in Maryland

February 9, 2021

The potential override of Gov. Larry Hogan’s (R) veto of a digital advertising tax (HB732) looms large over the current legislative session in Maryland, though it is only one of many tax proposals under consideration in the state.

Washington State Lawmakers Considering New Bans and Higher Taxes on Nicotine Products

February 1, 2021

Washington state lawmakers have proposed a bill that would make it the second state to ban all flavored tobacco and the first to impose a nicotine cap on vapor products, and would increase taxes on vapor to among the highest in the nation.

Massachusetts Flavored Tobacco Ban Has Severe Impact on Tax Revenue

January 19, 2021

The Massachusetts flavored tobacco ban highlights the complications of contradictory tax and regulatory policy, the instability of excise taxes that go beyond pricing in the cost of externalities, and the public risks of driving consumers into the black market through excessive taxation or regulation.

Indiana Lawmakers Consider Cigarette Tax Increase

December 1, 2020

While increasing taxes on cigarettes may limit demand, a 200 percent hike may also result in a number of unintended consequences, such as increased smuggling.

New York Lawmaker Looks to Sin Taxes Once More

November 24, 2020

New York already suffers from significant smuggling of untaxed tobacco products—smuggled cigarettes accounted for 53 percent of cigarettes consumed in the state in 2018—and further increasing tobacco taxes is likely to make matters worse.

Cigarette Taxes and Cigarette Smuggling by State, 2018

November 24, 2020

Excessive tax rates on cigarettes in some states induce substantial black and gray market movement of tobacco products into high-tax states from low-tax states or foreign sources. New York has the highest inbound smuggling activity, with an estimated 53.2 percent of cigarettes consumed in the state deriving from smuggled sources.

Taxation of Tobacco and Vapor Products on the Ballot in Oregon

October 7, 2020

Oregon's Measure 108 introduces a risk of increased tax avoidance and evasion activity as consumers of the products often procure cigarettes from lower tax jurisdictions. At $3.33 per pack, Oregon would have the highest excise tax on cigarettes in the region.

Massachusetts Ban of Flavored Cigarettes Is Getting Expensive

August 3, 2020

Aside from public health concerns, a ban on flavored tobacco, especially when including cigarettes, has significant tax implications and could result in unintended consequences such as increased smuggling. In Massachusetts, more than 20 percent of cigarettes smoked are purchased out of state.

Cigarette Taxes in Europe

July 16, 2020

Ireland and the United Kingdom levy the highest excise duties on cigarettes in the European Union (EU), at €8.00 ($8.95) and €6.83 ($7.64) per 20-cigarette pack, respectively. This compares to an EU average of €3.22 ($3.61). Bulgaria (€1.80 or $2.01) and Slovakia (€2.07 or $2.32) levy the lowest excise duties.

Colorado Tobacco Tax Bill Includes Positive Change

June 11, 2020

While it is understandable that lawmakers and organizers are worried about Colorado’s financial situation, they should remember that narrow taxes are volatile and disrupt markets. Excise taxes can play a role in state revenues even as policymakers appreciate that excise taxes are not viable long-term revenue tools for general spending priorities.

Can States Close Budget Deficits with Excise Tax Hikes?

April 15, 2020

We examine whether excise taxes are a solution to budget deficits, and while the short answer to that question is no, there are of course nuances. Excise taxes can play a role in state revenues even as policymakers appreciate that excise taxes are not viable long-term revenue tools for general spending priorities.

What Happens with State Excise Tax Revenues During a Pandemic?

March 25, 2020

States will have to consider the effects of the COVID-19 pandemic on their excise tax revenues, including from gas taxes, tobacco taxes, and alcohol taxes.

Maryland Legislature Seeks Revenue with Risky Proposals

February 26, 2020

One notable consequence of high state tobacco excise tax rates is increased smuggling as people procure discounted products from low-tax states and sell them in high-tax states. Smugglers wouldn’t have to look far to find cheaper smokes. All of Maryland’s neighboring states have rates lower than $4 per pack, including Virginia ($1.20) and West Virginia ($0.30). Such an increase would impact the many small business owners operating vape shops around the state and convenience stores relying heavily on vapers as well as tobacco sales.

Virginia Governor Looks to Excise Taxes

December 23, 2019

The proposed budget reflects a growing trend as policymakers across the country look to excise taxes as long-term solutions to budget woes. While excise taxes can be a part of the revenue picture, they are not a sustainable revenue source due to their narrow base, which is easily affected by changes in consumer behavior or market conditions.

Cigarette Taxes in Europe

August 22, 2019

Today, Ireland and the United Kingdom levy the highest excise duties on cigarettes in the European Union (EU), at €7.57 (US $8.93) and €6.57 ($7.75) per 20-cigarette pack, respectively. This compares to an EU average of €3.09 ($3.64). In contrast, Bulgaria (€1.76 or $2.07) and Hungary (€1.96 or $2.31) levy the lowest excise duties.

How High Are Cigarette Taxes in Your State?

April 10, 2019

Cigarette taxes around the country are levied on top of the federal rate of $1.0066 per 20-pack of cigarettes. As of 2016, taxes accounted for almost half of the retail cost of a pack of cigarettes.

How Stable is Cigarette Tax Revenue?

May 3, 2021

This web tool allows taxpayers to see how cigarette tax revenues have changed since 1955. Across almost all states, a clear pattern of volatility emerges. Tax rate hikes are met with a momentary bump in revenue, followed by a falloff.

Four Issues with Proposal to Increase Tobacco and Vapor Taxes in Maine

April 13, 2021

Maine's proposal to increase tobacco and vapor taxes has at least four major issues: flawed revenue allocation, risk of increased smuggling, regressivity, and violation of the harm reduction principle.

How High Are Vapor Taxes in Your State?

April 7, 2021

Several states are considering introducing or increasing taxes on vapor products to make up declining tax revenue from traditional tobacco products or to fill budget holes in the wake of the coronavirus pandemic. However, lawmakers should approach the issue carefully because flawed excise tax design on vapor products could drive consumers back to more harmful combustible products like cigarettes.

Why Smoking and Vaping Tax Increases Should Not be Part of West Virginia’s Reform Proposals

April 5, 2021

In West Virginia, both Senate Republicans and Gov. Justice have offered proposals for reductions to the state’s income tax. In both of the proposals, excise taxes on tobacco and nicotine products are part of the pay-fors that are supposed to make up revenue lost due to lower income tax rates.

Washington State Lawmakers Consider 1,000% Tax Increase on Tobacco Businesses

March 19, 2021

Limiting addiction to nicotine is a laudable goal, but lawmakers should exercise caution with the methods employed. Using gross receipts taxes on businesses to effectively levy an excise tax introduces complexity to an already flawed tax design. It is better to let the excise tax internalize externalities and the business tax raise general revenue.

Excise Tax Application and Trends

March 16, 2021

The excise tax family is growing. Over the last decade, several products have become subject to excise taxes or are in the process of becoming so. Given this development, it is more crucial than ever that lawmakers, businesses, and consumers understand the possibilities and, more importantly, limitations of excise tax application.

Smoking High Excise Taxes on Vapor Products Could Be Coming to West Virginia

February 18, 2021

West Virginians would face extraordinarily high taxes on vapor products in state if Senate Bill 68 becomes law. The bill would increase taxes on liquid used in vapor products from 7.5 cents per milliliter (ml) to $1 per ml—an increase of over 1,300 percent.

Tax-A-Rama in Maryland

February 9, 2021

The potential override of Gov. Larry Hogan’s (R) veto of a digital advertising tax (HB732) looms large over the current legislative session in Maryland, though it is only one of many tax proposals under consideration in the state.

Washington State Lawmakers Considering New Bans and Higher Taxes on Nicotine Products

February 1, 2021

Washington state lawmakers have proposed a bill that would make it the second state to ban all flavored tobacco and the first to impose a nicotine cap on vapor products, and would increase taxes on vapor to among the highest in the nation.

Massachusetts Flavored Tobacco Ban Has Severe Impact on Tax Revenue

January 19, 2021

The Massachusetts flavored tobacco ban highlights the complications of contradictory tax and regulatory policy, the instability of excise taxes that go beyond pricing in the cost of externalities, and the public risks of driving consumers into the black market through excessive taxation or regulation.

New York Lawmaker Looks to Sin Taxes Once More

November 24, 2020

New York already suffers from significant smuggling of untaxed tobacco products—smuggled cigarettes accounted for 53 percent of cigarettes consumed in the state in 2018—and further increasing tobacco taxes is likely to make matters worse.

Taxation of Tobacco and Vapor Products on the Ballot in Oregon

October 7, 2020

Oregon's Measure 108 introduces a risk of increased tax avoidance and evasion activity as consumers of the products often procure cigarettes from lower tax jurisdictions. At $3.33 per pack, Oregon would have the highest excise tax on cigarettes in the region.

Massachusetts Ban of Flavored Cigarettes Is Getting Expensive

August 3, 2020

Aside from public health concerns, a ban on flavored tobacco, especially when including cigarettes, has significant tax implications and could result in unintended consequences such as increased smuggling. In Massachusetts, more than 20 percent of cigarettes smoked are purchased out of state.

Michigan Vapor Tax Bill Gets It Half-Right

June 18, 2020

In line with the nationwide trend of taxing vapor products, the Michigan Senate has passed a new 18 percent tax on vapor products. These taxes are often intended to achieve a two-fold goal: deterring youth use and raising revenue. The Michigan bill is no exception.

Colorado Tobacco Tax Bill Includes Positive Change

June 11, 2020

While it is understandable that lawmakers and organizers are worried about Colorado’s financial situation, they should remember that narrow taxes are volatile and disrupt markets. Excise taxes can play a role in state revenues even as policymakers appreciate that excise taxes are not viable long-term revenue tools for general spending priorities.

How High Are Vapor Taxes in Your State?

June 3, 2020

Many states may be looking toward vapor and other excise taxes to fill budget holes caused by the coronavirus crisis. While those areas may represent untapped revenue sources for many states, taxing those activities is unlikely to raise much revenue in the short term.

Can States Close Budget Deficits with Excise Tax Hikes?

April 15, 2020

We examine whether excise taxes are a solution to budget deficits, and while the short answer to that question is no, there are of course nuances. Excise taxes can play a role in state revenues even as policymakers appreciate that excise taxes are not viable long-term revenue tools for general spending priorities.

What Happens with State Excise Tax Revenues During a Pandemic?

March 25, 2020

States will have to consider the effects of the COVID-19 pandemic on their excise tax revenues, including from gas taxes, tobacco taxes, and alcohol taxes.

Excise Taxes on Vapor Products Are Trending

March 11, 2020

While lawmakers are working through the design of vapor tax proposals, they must thread the needle between protecting adult smokers’ ability to switch and barring minors’ access to nicotine products. A good first step is creating appropriate definitions for the new nicotine products to avoid unintended disproportionate taxation based on design differences or bundling.

Maryland Legislature Seeks Revenue with Risky Proposals

February 26, 2020

One notable consequence of high state tobacco excise tax rates is increased smuggling as people procure discounted products from low-tax states and sell them in high-tax states. Smugglers wouldn’t have to look far to find cheaper smokes. All of Maryland’s neighboring states have rates lower than $4 per pack, including Virginia ($1.20) and West Virginia ($0.30). Such an increase would impact the many small business owners operating vape shops around the state and convenience stores relying heavily on vapers as well as tobacco sales.

Banning Flavored Tobacco Could Have Unintended Consequences

February 12, 2020

The prospect of a ban on flavored tobacco and nicotine products highlights the complications of contradictory tax and regulatory policy, the instability of excise taxes that go beyond pricing in the cost of externalities, and the public risks of driving consumers into the black market through excessive taxation or regulation.

Virginia Governor Looks to Excise Taxes

December 23, 2019

The proposed budget reflects a growing trend as policymakers across the country look to excise taxes as long-term solutions to budget woes. While excise taxes can be a part of the revenue picture, they are not a sustainable revenue source due to their narrow base, which is easily affected by changes in consumer behavior or market conditions.