Tag Archives: cigarette tax rates

Nebraska retailers oppose cigarette tax increase

US cigarette taxes by state

Increasing the statewide cigarette tax by three times would affect Nebraska retailers significantly, as the customers would switch to Iowa and Missouri tobacco shops, where they would be able to save nearly $18 per carton, according to state lawmakers.

Mark Whitehead, owner of convenience store chain across the state testified that sales of tobacco products make up 35 percent of total sales. “This business is focused to providing a service an a product to the clients, and cigarettes represent the top-selling product category.”

However, supporters of cigarette tax hike stated that “customers’ exodus” didn’t happen when the tax was increased last time, in 2002 and should not be a major issue now.

They claimed the price hike would encourage thousands of people to stop or never start smoking, in addition to generating approximately $100 million every year in revenue to prevent cuts in such state care programs as health-care and education.

Grand Island Sen. Mike Gloor, the author of the bill said that smoking is the top health issue in Nebraska and needs to be curbed.

Gloor stated he had seen horrible health complications caused by smoking while he was working as a hospital administrator. He said he pledged to himself he would do his best to resolve that problem in case he ever gained the chance.

That resulted in the introduction of Legislative Bill 436, under which the state’s cigarette tax would be increased from 64 cents per pack up to $1.99 per pack. Neighboring Iowa has $1.36 per pack and Missouri’s is home to the nation’s lowest cigarette tax at 17 cents a pack.

Currently Nebraska is ranked 38th among the states in cigarette tax rate. If the increase is approved, the state tax will become 16th-highest. In addition, according to Gloor several states consider increasing the taxes as well.

However, he admitted that in case the Bill 436 is approved, it won’t be only for the reasons of public health, but also for financial reasons, as the state is eager to find sources of extra revenue.

The bill will provide approximately $31 million every year to avoid expected cuts in payments to health-care sector, and nearly $500,000 would be directed to smoking-cessation programs.

Nevertheless the most part – nearly $70 million annually – would be generated for the state budget to help close an approximately $1 billion gap between estimated earnings and projected expenses.

Kearney Sen. Galen Hadley said that the bill and corresponding tax hike would affect low-income Nebraskans more significantly, since more people in this social group are smokers. In addition York Sen. Greg Adams asked if it was fair to hit the minority of residents (around 19 percent) who are smokers with a huge increase.

Gov. Dave Heineman has promised to veto any tax hike, including the cigarette tax. Therefore, supporters would have to collect 30 votes in the Legislature to supersede the veto.

Federal Court of Appeals Rules against NY

Indian nations located across the New York State have won another round in the continuous cigarette tax legal battle against the state: The tribal nations have the right to continue sales of tax-free cigarettes to non-members of the tribes within the territories of the sovereign tribes whereas the court examines whether the new NY tax legislation is constitutional.

Smoking tobacco tax program

Earlier this month the Second Circuit Court of Appeals ruled against the state solicitation to impose an injunction which prohibit the state from taxing cigarette sales on Nations’ land whereas several challenges to the new tax code are pending.

However the court decided to consolidate appeals filed by several Indian Nations in one case. The tribes initiated lawsuits and filed appeals against New York state tax legislation that would oblige them to collect taxes from sales of cigarettes to non-Indians by demanding wholesalers to pay $4.35-per-pack tax on all cigarettes sold across the state and impose the tax on Native tobacco shops.

“Of course this is not final decision, but the ruling by the appeals court permits our stores to continue operation for the near future,” admitted Robert Odawi Porter, leader of Seneca Indian Nation. “We are going to continue the legal fight against this unconstitutional effort by the state that violates our treaty rights and destroys our business as well as the jobs it provides.”

During the past several months, two separate courts ruled to reject the state from imposing its latest tax strategy.

In October, the U.S. District Court Judge David Hurd, gave a preliminary injunction in a lawsuit initiated by the Oneida Indian Nation against Gov. David Paterson and New York State, requesting the court to decide whether the new tax code is illegal. The tax law, approved last summer, ended the state’s long-term “forbearance” policy that permitted the Indian Nations tobacco business to prosper, earning billions of dollars for the state budget and opening thousands of work positions in the state.

This ruling was hailed by Oneida Nation.

“The Oneida Nation welcomes the decision of the federal appeals court that is continuing to reject New York state’s attempts to infringe the nation’s sovereignty by collecting taxes from wholesalers of products sold across the Oneida reservation as well as other Indian lands throughput this state,” state Mark F. Emery, director of communications. “Although we are convinced that such matters should be decided by negotiation, the Oneida nation is read to protect its freedoms in court.”

In the 25-page ruling, Judge Hurd gave significant evidence against the New York state amendments in tax law.

The judge agreed with Oneida that the legislation would cause irretrievable damage by demanding the nation to pay a $4.35-per-pack tax, which he named “unconstitutional,” since a sovereign nation tribe is not subject to taxation.

The state has filed an appeal against Hurd’s ruling.

Another ruling against the New York state was issued by Judge William Arcara of the Western District Court, who rejected the Seneca and Cayuga Nations’ motion for a preliminary injunction and provided a stay against the state imposing the tax legislation.

Arcara ruled that the nations’ tribal rights “are not unconstitutionally burdened” by the latest cigarette tax legislation, and that Indian nations failed to prove a likeability of success on the merits of their claims.

However, the judge admitted that the tax legislation is likely to have an adverse effect on the nations’ current tobacco businesses.

Balkan contrabandists expand as residents evade from cigarette tax increases

Cash-strapped Romania and Bulgaria hoped that taxing cigarettes would be an easy and simple method of raising money but the increases only pushed smokers to a constantly growing black market.

cigarettes and taxes

Criminal gangs and poor Roma communities that are situated near the borders of such countries as Macedonia, Ukraine and Serbia, where the prices on cigarette products are lower, were smuggling cigarettes that has wiped out profits from higher excise taxes.

This year Bulgarian government increased taxes by nearly a half and also ordered to customs officials and police officers check all shops and markets. Tax revenues from cigarette sales have decreased by nearly a third in 2010, according to data provided by the customs officials.

Bulgaria and Romania are the two poorest countries in the European Union that try to recover from deep recessions and their governments have a strong incentive to let their populations keep smoking in the near future.

Bulgaria revoked the national ban on smoking in all bars and restaurants in June due to pressure from cigarette manufacturers, importers and distributors and also due to the need for tobacco sales as public revenue dropped.

Only Kyustendil, a town of 70,000, hold the ban from July 1and the resentment is evident, with club owners worried about making both ends meet and clients frustrated. Few people believe that this ban will survive the winter.

Excise taxes on tobacco products are an important source of revenue and accounted for 10% of all Bulgaria’s gains last year, $1.15-billion (U.S.).

Bulgaria is the most addicted to smoking along with Greece, with some 40% of the population smokers, according to a recent survey conducted by the Eurobarometer. About 22 million of neighbor Romanian population smoke.

“The abrupt excise increase revolted many consumers and raised the demand for cheap cigarettes. At present we see some brands that we have never seen before,” declared Ivan Bilarev, administrative manager of state-controlled Bulgartabak.

Cigarette prices in Bulgaria and Romania are well below than in many other European countries, about 2.00-2.50 euros per pack, but still rather expensive for consumers as they receive lower incomes.

That is why many smokers prefer cigarettes from black marker, as there a pack of cigarettes costs 1.00-1.75 euros.

Mr. Bilarev declared that smuggling has affected sales at Bulgartabak and according to some analysts a total smoking ban would lower the company’s price a pending privatization.

Overall losses from smuggling will probably overbalance tax profits as Bulgaria effort to fight the raising black market that has increased to over 30 % of all cigarette sales and could cost 500 million levs in lost profits this year.

Romania has the same problems as Bulgaria, after doubling cigarette prices in 2009 then increasing value added tax (VAT).

It was estimated that about a third of cigarettes in Romania are smuggled and it could cost the state over 1 billion euros.

State cigarette tax rates and rankings

Table shows all cigarette tax rates in effect now and those that will go into effect through June 30, 2009

State Tax Rank
Alabama $0.42 43rd
Alaska $2.00 6th
Arizona $2.00 6th
Arkansas* $1.15 25th
California $0.87 31st
Colorado $0.84 32nd
Connecticut $2.00 6th
Delaware $1.15 25th
DC $2.00 6th
Florida $0.34 47th
Georgia $0.37 44th
Hawaii $2.00 6th
Idaho $0.57 40th
Illinois $0.98 29th
Indiana $0.99 28th
Iowa $1.36 20th
Kansas $0.79 34th
Kentucky** $0.60 38th
State Tax Rank
Louisiana $0.36 45th
Maine $2.00 6th
Maryland $2.00 6th
Massachusetts $2.51 3rd
Michigan $2.00 6th
Minnesota*** $1.50 18th
Mississippi $0.18 49th
Missouri $0.17 50th
Montana $1.70 16th
Nebraska $0.64 36th
Nevada $0.80 33rd
New Hampshire $1.33 22nd
New Jersey $2.58 2nd
New Mexico $0.91 30th
New York $2.75 1st
North California $0.35 46th
North Dakota $0.44 42nd
Ohio $1.25 23rd
State Tax Rank
Oklahoma $1.03 27th
Oregon $1.18 24th
Pennsylvania $1.35 21st
Rhode Island $2.46 4th
South Carolina $0.07 51st
South Dakota $1.53 17th
Tennessee $0.62 37th
Texas $1.41 19th
Utah $0.70 35th
Vermont $1.99 14th
Virginia $0.30 48th
Washington $2.02 5th
West Virginia $0.55 41st
Wisconsin $1.77 15th
Wyoming $0.60 38th
Puerto Rico $1.23 N/A
Guam $1.00 N/A
N. Marianas $1.75 N/A

* – Effective 4/1/2009

** – Effective 3/1/2009

*** – Tax Stamp includes 75¢ health impact fee and 27.4¢ cigarette sales tax

Table shows all cigarette tax rates in effect now and those that will go into effect through June 30, 2009. Since 2002, 44 States, DC, and several U.S. territories have increased their cigarette tax rates 84 times. The six states in bold type have not increased their cigarette tax since 1999 or much earlier. Currently, 27 states (including DC) and Puerto Rico, the Northern Marianas, and Guam have cigarette tax rates of $1.00 per pack or higher, and 13 states (including DC) have cigarette tax rates of $2.00 per pack or higher. Tobacco states are KY, VA, NC, SC, GA, and TN. States’ average includes DC, but not Puerto Rico, other U.S. territories, or local cigarette taxes. Including Puerto Rico (which has a larger U.S. population than more than 20 states and DC) raises the state average slightly. The median tax rate is $1.15 per pack. MI, MN, and UT also have special 35¢ per pack taxes or fees on brands of manufacturers not participating in the state tobacco lawsuit settlements (NPMs). The highest combined state-local tax rate is now $4.25 in New York City, with Chicago, IL second at $3.66 per pack. Other high state-local rates include Evanston, IL at $3.48 and Anchorage, AK at $3.324 per pack.

Federal cigarette tax will increase to $1.01 per pack on 3/31/09. From the beginning of 1998 through 2002, the major cigarette companies increased the prices they charge by more than $1.25 per pack (but also instituted aggressive retail-level discounting for competitive purposes and to reduce related consumption declines). In January 2003, Philip Morris instituted a 65-cent per pack price cut for four of its major brands, to replace its retail level discounting and fight sales losses to discount brands, and R.J. Reynolds followed suit. In the last several years, Philip Morris, Reynolds American, and Lorillard have increased their product prices by at least 20 cents per pack. The U.S. Centers for Disease Control & Prevention estimates that smoking-caused health costs total $10.28 per pack sold and consumed in the U.S.

The average price for a pack of cigarettes nationwide is roughly $5.01 (including statewide sales taxes but not local cigarette or sales taxes, other than NYC’s $1.50 per pack cigarette tax), with considerable state-to-state differences because of different state tax rates, and different manufacturer, wholesaler, and retailer pricing and discounting practices. AK, DE, MT, NH & OR have no state retail sales tax at all; CO, MN & OK have a state sales tax but it do not apply it to cigarettes; and AL, GA & MO (unlike the rest of the states) do not apply their state sales tax to that portion of retail cigarette prices that represents the state’s cigarette excise tax.