Maryland's Tobacco Resource Center - Linking Professionals to Best Practices

Higher Cigarette Taxes Might Cut Smoking and Have Unintended Consequences

March
2009

An additional $1.01 in taxes will be added when the State Children's Health Insurance Plan law (SCHIP) will go into effect, effectively raising the national price of a pack of cigarettes to roughly $5. While such an increase will no doubt lower demand for cigarettes, less consumption also means less tax revenue going into the hands of the local and federal governments. The potential tax revenue lost may be close to $500 million. Also, there is a fear that the tobacco companies may true to recuperate some of these losses by demanding the $37 billion in municipal bonds that are owed. While many states in the past have relied on tobacco companies as large sources of tax revenue, the current trend has shifted towards a policy more focused on public health and preventing smoking initation.