TOBACCO TAX BENEFITS FOR MASSACHUSETTS
REDUCING SMOKING, SAVING LIVES, AND SAVING MONEY
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Introduction & Executive Summary
Increasing Massachusetts cigarette tax rate would reduce smoking, save lives, and reduce smoking-caused costs for government,
the private-sector and households throughout the Commonwealth. In addition, it would provide millions of dollars in new revenues
for health care reform and tobacco prevention.
Smoking is taking a terrible toll on Massachusetts.
The toll of tobacco use in Massachusetts remains very high. Each year, 9,000 adults die from their own smoking,
8,300 more kids become new addicted daily smokers, and countless other Massachusetts residents suffer from smoking-caused
disease and disability with annual smoking-caused health costs in the state totaling more than $3.54 billion.
In fact, the U.S. Centers for Disease Control and Prevention (CDC) estimates that smoking-caused health costs and
productivity losses in Massachusetts total more than $19.49 per pack sold in the state.*
Massachusetts cigarette tax and the rest of the country.
Massachusetts has not increased its cigarette tax for six years, when its new $1.51 per pack tax rate ranked first
in the nation for state cigarette tax rates. Since then, 42 other states and DC have increased their rates more
than 70 times. Massachusetts current $1.51 per pack cigarette tax rate ranks 15th highest in the nation and fifth out
of the six New England states. In fact, nine states now have cigarette tax rates of $2.00 or higher.
While New Jersey has the highest state rate at $2.575 per pack, various cities and counties have even higher combined
state-local cigarette tax rates, such as $3.00 per pack in New York City and $3.66 per pack in Chicago (but no Massachusetts localities have their own cigarette tax).
A $1.00 increase to Massachusetts cigarette tax rate would quickly produce massive public health and economic benefits.
A $1.00 increase to the state cigarette tax rate would generate more than $150 million in additional new state revenue.
But the rate increase would also produce enormous public health and economic benefits to the state and its residents,
including:
- Preventing more than 46,100 Massachusetts kids from becoming addicted adult smokers
- Prompting more than 25,800 current adult smokers to quit for good
- Saving more than 21,500 Massachusetts citizens from dying prematurely from smoking
- Improving worker productivity throughout the state
- Cutting future public, private sector, and household health costs in Massachusetts by more than $1.0 billion
- Reducing future state MassHealth program expenditures caused by smoking by more than $173 million?/li>
* For more detail on the toll of tobacco in Massachusetts, see Appendix A.
For a full list of benefits to Massachusetts from $1.00 cigarette tax increase, see Appendix B.
Tobacco Tax Choices for Massachusetts / Page 1
Investments in comprehensive tobacco prevention programs would produce even more benefits and savings. Investing just a portion of the new revenue from the cigarette tax rate increase to fully fund the state? efforts to prevent and reduce tobacco use and its harms would work to prevent and reduce tobacco use and its harms in Massachusetts even more effectively and powerfully supplementing and maximizing the public health benefits and cost savings from the tobacco tax rate increases alone.
Lower-income households would benefit the most. Because more lower-income smokers will quit in response to a substantial cigarette tax increase, both proportionately and in total numbers, lower-income families in Massachusetts would be the largest beneficiaries from a $1.00 increase. More than one-third of those expected to quit have incomes below 200 percent of the poverty line. Moreover, each smoker that quits would free his family from exposure to his or her secondhand smoke and would save more than $2,350 per year for each pack per day no longer purchased due to the rate increase. Low-income families currently suffer disproportionately from smoking and smoking-caused disease and costs, but a $1.00 rate increase would directly and substantially reduce that burden.
Tobacco tax increases are a predictable and stable source of substantial new state revenues. Every single state that has significantly raised its cigarette tax rate has enjoyed substantial increases to state revenues, despite the related declines in state smoking levels and despite any related increases in cigarette smuggling or cigarette tax avoidance. Put simply, the increased tax per pack sold brings in more new revenue than is lost by the related pack sales declines. Moreover, once the dust has settled after a major cigarette tax increase, the new higher levels of state tobacco tax revenues typically decline by only about two percent per year, on average, because of ongoing reductions in state smoking rates. Year to year, state cigarette tax revenues are more predictable and less volatile than many other state revenue sources, such as state income tax or corporate tax revenues, which can vary considerably year to year because of nationwide recessions or state economic slowdowns.
Governor Patrick has already proposed measures to limit tax evasion. By taking steps to keep up with inflation and to minimize cigarette smuggling and tax evasion, Massachusetts could increase and protect the revenues that it would collect from a $1.00 rate increase. In his budget proposal, Governor Patrick has introduced strategies such as using enhanced tax stamp technology to effectively track cigarette packs and ensure their tax collection. In addition, the state could also prohibit tax-evading Internet sales of cigarettes and other tobacco products into the state.
Increases to the state? tax rates on other tobacco products would produce additional substantial benefits and savings. Raising the smokeless tobacco tax to a comparable rate as the proposed new cigarette tax would require a 20 percent increase, whereas the tax on cigar and smoking tobacco would have to increase by a higher amount. Implementing a parallel tax rate increase on other tobacco products would bring the state an additional $1.5 million more in new revenues each year while also reducing these other forms of tobacco use and the many harms and costs they cause. Among other things, a higher tax rate on other tobacco products would reduce the number of kids using smokeless tobacco by 13 percent and cut overall consumption by about seven percent thereby reducing the death, oral cancers and other health problems caused by smokeless use. Increasing the tax rates on smokeless tobacco products and cigars is especially important for reducing youth use because they are increasingly being produced and marketed with kid-friendly flavors, such as grape, cherry, and chocolate.
Tobacco Tax Choices for Massachusetts / Page 2