Increase the Tax, Reduce the Demand.

• Position: Cigarette sales - Brief Article - Statistical Data Included

The surgeon general recently reported that increased tobacco prices will reduce its use. This seemingly simple principle of economics often creates turmoil among state legislators who have to raise taxes to hike cigarette prices.

Beyond hesitating to increase taxes of any kind, legislators face a number of questions: If we raise taxes in our state will smokers go to neighboring states to purchase cigarettes? Will smokers buy tobacco products on Indian reservations where taxes are lower, nonexistent or not enforced?

As of May 2001, state cigarette excise taxes ranged from $0.025 per pack in Virginia to $1.11 per pack in New York. The federal cigarette excise tax is currently $.34 per pack. At least 24 states introduced legislation in 2001 to increase cigarette excise taxes.

Washington passed a law in May that allows tribal reservations to charge a cigarette tax to non-Indians, thus reducing both the price difference and the lure to purchase cigarettes on reservations. Lawmakers hope that by giving tribes the right to charge an $0.82 tax per pack and keep the money, Indian merchants will be more conscientious about collecting it. The money can be used to fund tribal governments and for economic development on reservations.

A multistate campaign to raise tobacco taxes is being pushed by the Alliance for a Healthy New England. The group wants to increase...