Tobacco Taxes are Not Effective

September 21, 2012 Taxation in USA

taxes on cigarettesNEW YORK – Tobacco taxes in the USA do not work, and poor taxpayers in the country devote nearly a quarter of their incomes to tobacco products.

On September 20th the research group RTI International published a new report on the burdens placed on taxpayers by excise duties for cigarettes and tobacco products, showing that the increases may not have the intended effect on individuals with low incomes.

The report, which was commissioned by the New York State Department of Health, compared smoking rates across the USA, but concentrated on smokers in New York state, which currently pay one of the highest rates of tobacco excise duties in the country.

According to RTI, when excise taxes in New York were raised recently from USD 1.50 per pack to USD 4.35 per pack there was no significant decrease in the prevalence of smokers in the low-income tax bracket.

Smokers with high-incomes were found to be more sensitive to tax increases than smokers with low-incomes, and purchased less tobacco products following the hike.

The study also demonstrated the negative effects that the hikes had on the financial well being of low income taxpayers, confirming that it only led to an increasing percentage of their incomes being spent on tobacco products, rising from approximately 11.6 percent to 23.6 percent of their total incomes.

Analysis by the RTI showed that nearly 45 percent of all tobacco sales in the state of New York are completed without paying the excise taxes, as, according to the report, some of them are sold on Indian reservations, where excise duties are not applied.

Photo by Neil. Moralee