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Question of the Month April 2003 How many Midwestern states increased cigarette taxes in 2002? According to the Federation of Tax Administrators, six states in the Midwestern region increased their cigarette taxes in 2002, joining the 13 others nationwide that boosted rates last year. Per-pack tax increases in Illinois, Indiana, Kansas, Michigan, Nebraska and Ohio ranged from 30 cents to 50 cents. The average cigarette tax rate in the United State is 48 cents (compared to 64 cents in the Midwestern states), with the national extremes being Virginia at 2.5 cents per pack and Massachusetts at $1.51 per pack. The highest cigarette tax in this region is in Michigan, where the per-pack rate of $1.25 is the sixth highest among U.S. states. South Dakota had the lowest rate in the Midwest, 33 cents per pack, entering the 2003 legislative session. However, in its final budget agreement this year, the Legislature decided to boost the rate by 20 cents. As a result, Iowa now has the region’s lowest rate (36 cents per pack). In comparison to other proposed tax increases, changes to the cigarette tax have received much broader support — in part because some believe higher prices will stop some people (particularly youths) from using tobacco. According to The National Center for Tobacco-Free Kids, higher cigarette taxes do deter smoking in young people. On the other hand, a Cornell University study found no decrease in the smoking rates of states where cigarette taxes have been increased. Opponents of cigarette tax increases argue that they unfairly target the pocketbooks of low-income people, who, statistics indicate, are more likely to smoke than middle- and upper-class individuals. Supporters, though, counter by saying the tax is "voluntary" — if you don’t smoke, you don’t pay the tax. In 2003, several proposals have been made in various Midwestern states to raise the cigarette tax. North Dakota lawmakers rejected a tax boost proposed by Gov. John Hoeven. For a listing of cigarette tax rates nationally, visit the FTA’s Web site at www.taxadmin.org/fta/rate/cigarett.html. For more information on this or any other public policy issue, please call 630.925.1922 or complete the online form for research services. Return to Question of the Month For more information, contact: CSG Midwest

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