North Carolina Leaders Miss Opportunity to Improve Health, Raise Revenue by Increasing Cigarette Tax

Statement of William V. Corr, Executive Director Campaign for Tobacco-Free Kids

Jun. 27 2003

Washington, D.C. — As North Carolina leaders put the finishing touches on their FY2004 budget, it appears almost certain that a cigarette tax will not be included. By failing to join the 30 other states that have recently increased their cigarette taxes, North Carolina's leaders have let down the state's kids and taxpayers. They have missed an opportunity to implement a single solution that can improve both the state's physical health by reducing smoking, especially among kids, and its fiscal health by raising much-needed revenue. What's more, a recent poll of North Carolina voters found that 62 percent of voters favor a 50-cent cigarette tax increase. Unfortunately, the political influence of the tobacco industry appears to have won out over the many benefits of a cigarette tax increase and the strong public support for it. Governor Easley should rethink the state's budget priorities and support members of the Senate who are standing up for kids by urging a cigarette tax increase.

North Carolina is missing out by keeping its cigarette tax at only five cents per pack, the third lowest in the country. By increasing the cigarette tax to 75 cents, North Carolina would raise an additional $368 million annually in new revenues, prevent some 106,000 kids from becoming smokers, save 48,800 residents from smoking-caused deaths, and produce $1.83 billion in long-term health care savings.

On July 1, cigarette tax increases will take effect in six more states – Georgia, Hawaii, New Mexico, Rhode Island, Vermont and Wyoming. This will bring to 29, along with the District of Columbia and Puerto Rico, the number of states that have increased cigarette taxes since January 1, 2002 (several of these states have increased their cigarette taxes more than once). On July 31, Delaware will become the 30th state to increase its cigarette tax.

Once all are in effect, these cigarette tax increases will have raised the average state cigarette tax from 43.4 cents on December 31, 2001, to 70.5 cents. With the 39-cent federal cigarette tax added, the average combined state-federal cigarette tax will be $1.10. The U.S. Centers for Disease Control and Prevention estimates that smoking-caused health costs and lost productivity in the United States total $7.18 per pack. Of the 30 states that have increased cigarette taxes, 20 have done so under the leadership of Republican governors.

According to an analysis by the Campaign for Tobacco-Free Kids, the combined effect of these cigarette tax increases will be to:

  • Prevent more than 850,000 kids from starting to smoke
  • Spur more than 520,000 adult smokers to quit
  • Prevent more than 380,000 smoking-caused deaths
  • Produce more than $14.6 billion in long-term health care savings
  • Raise more than $4.1 billion in annual revenue for states struggling with budget shortfalls.

These estimates are based on research showing that every 10 percent increase in the price of cigarettes reduces youth smoking by approximately seven percent and overall cigarette consumption by three to five percent.

Preliminary evidence confirms that every state that has significantly increased its cigarette tax in recent years has enjoyed substantial increases in revenue, even while reducing cigarette sales. Michigan, for example, collected $104 million more in cigarette tax revenue in the last five months of 2002 compared to the year before despite a 15.5 percent reduction in cigarette pack sales. Nebraska's 2002 tax increase has produced $10 million more in additional revenues between October 2002 and April 2003 than in the same period the year before. Even in New York City, where the combined state and local cigarette tax rate has increased to $3.00 per pack, the city's tax increase from 8 cents to $1.50 per pack is on track to bring in a quarter of a billion dollars in new revenue over the first year despite sharp declines in cigarette sales.

Tobacco's toll is devastating in North Carolina, 27.8 percent of high school students currently smoke, and 24,600 more kids become regular, daily smokers every year, one-third of whom will die prematurely. Smoking-caused health care costs North Carolina and its taxpayers $1.92 billion a year.

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Comprehensive information on state tobacco taxes (and the benefits from increasing them) is available at http://tobaccofreekids.org/reports/prices. If you have any questions or would like additional information, please call Tony Iallonardo at 202-296-5469.

 

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