US State Tax Revenues from Cigarettes: 1970-2019

In the above animated bar chart, you’ll see very modest, steady increases in tax revenue gathered by states in the 70’s and 80’s. Only when we get into the 90’s and 2000’s do we see big spikes in revenues from certain states. This is due to a rash of major excise tax increases by states throughout this period as a method of curbing cigarette smoking. There’s no doubt that this method has worked. Most states now see a 12%-17% adult smoking rate compared to a high of around 42% in 1965.

Some of the biggest states with the highest revenues were the first to make significant tax increases. You can see in the chart how often New York and California have had major spikes in revenues which then gradually decrease as more and more smokers quit.

It’s also important to note that there is a federal tax on cigarettes as well, which now stands at $1.01 after a $0.70 increase from the Children's Health Insurance Program Reauthorization Act of 2009.

US State Tax Increases Per Pack and Effect on Revenue

California Cigarette Tax Increases

  • 1988
    • Cigarette tax increased from $0.10 to $0.35.
    • Proposition 99 passed by 58% to 42% and was one of the first statewide ballots that significantly increased tax on cigarettes. The effect on state revenue was an increase from $260 million to over $750 million in one year.
  • 1999
    • Cigarette tax increased from $0.37 to $0.87.
    • State revenues almost doubled after this increase, from $620 million to $1.1 billion.
  • 2016
    • Cigarette tax increased from $0.87 to $2.87.
    • State revenues more than doubled this time from $750 million to $1.8 billion. Note how much revenue had fallen between 1999 and 2016 at the $0.87 rate.

New York Cigarette Tax Increases

  • 2000
    • Cigarette tax increased from $0.56 to $1.11.
    • State revenues increased from $650 million to over $1 billion in a single year.
  • 2002 (New York City Local Tax)
    • Cigarette tax increased from $0.08 to $1.50.
    • City cigarette tax revenues increased from $27.4 million to $296.2. Almost 10 times as much! It’s estimated that there was an 11% decline in adult smoking rates in New York City in that one year after the tax was increased.
  • 2008
    • Cigarette tax increased from $1.50 to $2.75.
  • 2010
    • Cigarette tax increased from $2.75 to $4.25.
    • When you add up local, state, and federal taxes in New York City, the total taxes come to $6.86. Over this time span between 2008-2010, state revenues only increased by $1.3 billion to $1.5 billion. By 2019, revenues are below $1 billion. This suggests that New York has hit a tax level where there are now diminishing returns.

Michigan Cigarette Tax Increases

  • 1994
    • Cigarette tax increased from $0.25 to $0.75.
    • Proposal A completed restructured how schools in the state were financed. Property taxes were removed as a form of school funding and other taxes took their place. The cigarette excise tax became a major source of funding schools. The state cigarette tax revenues skyrocketed from $250 million to $600 million after Proposal A passed.
  • 2002
    • Cigarette tax increased from $0.75 to $1.25.
  • 2004
    • Cigarette tax increased from $1.25 to $2.00.
    • After the increases in 2002 and 2004, Michigan saw its cigarette tax revenues increase from $600 million to $1.1 billion.

Pennsylvania Cigarette Tax Increases

  • 2002
    • Cigarette tax increased from $0.31 to $1.00.
  • 2004
    • Cigarette tax increased from $1.00 to $1.35.
    • The tax increases in 2002 and 2004 saw the cigarette tax revenues in Pennsylvania increase from just $330 million to over $1 billion!
  • 2009
    • Cigarette tax increased from $1.35 to $1.60.
  • 2016
    • Cigarette tax increased from $1.60 to $2.60.
    • State cigarette tax revenues increased from $1 billion to $1.3 billion, which suggests that a lot of people quit smoking after this tax increase.

Texas Cigarette Tax Increases

  • 2007
    • Cigarette tax increased from $0.41 to $1.41.
    • This is the only major cigarette tax increase that Texas has implemented, and it resulted in a revenue increase from $500 million to $1.4B. Revenues have decreased since then to end up at around $1.1 billion by 2019. Texas does have a slightly higher smoking rate than places like California and New York which have much higher taxes.

Florida Cigarette Tax Increases

  • 2009
    • Cigarette tax increased from $0.34 to $1.34. Much like Texas, Florida has only ever had one large increase in cigarette taxes. And like Texas, the increase was $1.00.

Florida has almost the exact same smoking rate as Texas, so the approach to controlling smoking among adults seem to almost match. If we look at the tax rates among the other states in this article, there is an argument to increasing taxes to, say, as much as California. Once you get to the New York level of taxes, then revenues seem to start falling off. If you look at the way the chart ends in 2019, California seems to have found the sweet spot of taxation where they have a very low level of smoking but with a high revenue for the state tax coffers.