State Tobacco Taxes Take Off

American Lung Association
Thursday, 14 February 2002

Lung Association Report Reviews Tobacco Laws Enacted in 2001

A growing number of states are increasing taxes on tobacco products to raise revenues needed to protect public health, improve access to health care and combat huge budget deficits, according to an American Lung Association report on state tobacco laws passed in 2001.

"Governors and state lawmakers are scrambling to plug holes in their budgets with whatever money they can find. Taxing tobacco is becoming very popular," said John L. Kirkwood, President and CEO of the American Lung Association.

"As a result, the $1-per-pack or more cigarette tax will soon become the norm rather than the exception," he predicted. Six states currently have tobacco taxes of $1 or more. The national average (as of January 1, 2002) is 44.6 cents per pack.

"That's good news for public health. Higher tobacco taxes are one of the best ways to keep kids from starting to smoke and motivate adults to stop," he said.

The American Lung Association® report, "2001 State Legislated Actions on Tobacco Issues," is the only up-to-date, comprehensive guide to state tobacco control laws. It is the latest edition in a series published annually since 1988.

According to the report, four states raised their tobacco excise taxes in 2001. Washington State increased its tax on cigarettes by 60 cents per pack, giving that state the nation's highest excise tax ($1.425) as of the end of last year. Maine and Rhode Island each increased their tobacco excise tax to $1.00 and Wisconsin raised its tax to 77 cents per pack. West Virginia enacted an excise tax on smokeless tobacco products.

Early indications show that many other states will follow suit in 2002. On January 25, 2002, New York State passed a bill raising its cigarette excise tax to $1.50, effective on April 3, 2002. That will give New York the highest tobacco tax in the nation.

Significant cigarette tax increases are now being considered by 17 or more states. Included are increases proposed or supported by the governors of Connecticut,

Indiana, Kansas, Minnesota, New Mexico, Oregon and Vermont. Rhode Island, which raised its tax last year, is considering another rate hike.

"The tobacco tax hike trend is going to snowball this year," said Kirkwood.

"Unfortunately, Big Tobacco also gained ground in 2001. The worst examples are states that granted special legal protection to tobacco companies," he said.

Oklahoma, Louisiana and West Virginia passed new laws giving special legal liability protection to tobacco companies. These laws effectively cap the appeal bond for the compensatory damages portion of a judgment in a civil action. An appeal bond now may not exceed $100 million in West Virginia, $50 million in Louisiana and Oklahoma's cap is only $25 million. Four other states have similar laws.

Already this year, tobacco industry special protection legislation has been introduced in Colorado and Michigan.

"It's outrageous that state legislatures are passing laws whose only purpose is to provide special legal protection for tobacco companies," said Kirkwood.

Other issues addressed by state tobacco laws adopted in 2001 include raiding tobacco settlement funds for deficit relief instead of tobacco-use prevention programs and securitizing tobacco settlement dollars by selling or pledging future settlement revenues in exchange for an up-front lump-sum payment. On the positive side, West Virginia joined other states in restricting the sale of bidis, which are flavored, herbal cigarettes popular among children.

For more information, or to contact American Lung Association, see their website at: www.lungusa.org