The Effect of the Federal Cigarette Tax Increase on State Revenue By Patrick Fleenor Tax Foundation

From $0.39 to $1.01 April 1, Today the federal cigarette tax will rise from 39 cents to $1.01 per pack. The proceeds will help fund expansion of the federal State Children's Health Insurance program. This program provides federal matching funds to states to assist them in providing health insurance to families and children. The SCHIP program is targeted at families with modest incomes above Medicaid eligibility limits. Of course what the federal government gives with one hand it takes with the other. A $6.3 billion increase in the federal cigarette excise will reduce the disposable incomes of residents in the states. Table 1 shows that this reduction ranges from $581 million in California to $10.8 million in the District of Columbia.

Current Expenditures Economics of Revenue Demand is probably more inelastic than the amount facing individuals, states. Why? $ Packs DS S'S' $0.62 Incremental Revenue Q1Q1 Q2Q2

Including Cigarette Externalities Health Costs Associated with Smoking:  Smokers' health costs shared by society.  Cost of family support (in case of early death).  Risk to nonsmokers (second-hand smoke). Question: Are smokers totally informed as to the cost of smoking? Current Expenditures $ Packs DS S'S' $0.62 Mgl Soc. Costs Ext, between $1 and $2 Q1Q1 Q opt