Research & Commentary: Idaho’s Tobacco Tax Advantage

Published February 1, 2012

Idaho House Revenue and Taxation Committee Chairman Dennis Lake (R-Blackfoot) says he wants to increase the state’s cigarette tax by $1.25 per pack, to help curb smoking and raise revenue.

Proponents of higher taxes on cigarettes—such as the American Lung Association—assume higher cigarette taxes are good for a state. But although some people may quit smoking after a big hike in a state’s tobacco tax, the negative effects of such taxes are much more evident.

Tobacco taxes unduly affect those who can least afford to pay them. According to data from the Centers for Disease Control and Prevention (CDC), only 7.7 percent of adult smokers in Idaho earn more than $50,000 per year.

Tobacco taxes also rarely bring in the expected revenues. They increase government spending while relying on a narrow and shrinking tax base, thus creating greater revenue gaps that taxpayers must fill through additional tax increases.

Idaho’s current 57 cents per pack cigarette tax is lower than in each of its neighboring states. (Wyoming’s is close, at 60 cents per pack.) Idaho should protect its competitive tax advantages, not destroy them. As a matter of sound tax policy, Idaho should avoid picking winners and losers with the tax code and instead focus on keeping the overall tax burden low.

The following documents offer additional information on cigarette tax hikes.

Policy Tip Sheet: Idaho Cigarette Tax
This Heartland Institute Policy Tip Sheet examines the facts regarding Idaho’s cigarette taxes. “Propping up government spending, especially with a narrow and shrinking tax base, creates many problems. Such tax increases typically lead to larger revenue gaps, unduly burden the poor, and divert attention from necessary spending reforms,” the document notes.

Five Things to Consider Before Raising Tobacco Taxes: A Review of the Research
This Heartland Institute Policy Brief argues, “Tax increases above current levels are not justified by appealing to the costs that smokers impose on nonsmokers. Smokers already pay more than this measure could justify.”

Idaho Tax Committee Chairman Pushes Cigarette Tax Hike; Others Push Back
Budget & Tax News reports on the debate over the proposed $1.25-per-pack tax hike on cigarettes in Idaho. Wayne Hoffman, executive director of the Idaho Freedom Foundation, is quoted as saying the bill “will do little, if anything, to curtail smoking,” while “hurting the jobs and people that benefit from the sale of a legal commodity.”

ID: Rep. Dennis Lake, “Errand Boy” for the Tax Hike Lobby
Americans for Tax Reform criticizes the tax-hike plan of Idaho state Rep. Dennis Lake (R-Blackfoot), noting, “Rather than take on the difficult decisions and prioritization expected of a legislator, Rep. Lake is content to erode Idaho’s competitiveness by raising taxes.”

Oppose a Burdensome Cigarette Tax Hike on the Poor!
The National Taxpayers Union explains how raising Idaho’s cigarette tax will drive consumers from local businesses and hurt lower-income Idahoans. “Raising an unreliable tax that heavily burdens the poor makes no economic sense. Instead of pursuing such an imprudent course, Idaho should continue its admirable effort to hold the line on state spending and foster economic expansion through tax reform,” the document states.

Research & Commentary: Top Ten Reasons Not to Raise Tobacco Taxes
This Heartland Institute Research & Commentary explains how targeted tax increases on items such as cigarettes undermine fiscal soundness and the press for real budget reform.

Ten Principles of State Fiscal Policy
In a concise, easy-to-read guide to state fiscal policy matters, The Heartland Institute presents the 10 most important principles of sound fiscal policy, from “Above all else: Keep taxes low” to “Protect state employees from politics.”

Cigarette Tax Hikes Burn Hole in State Coffers
Gregg M. Edwards, president of the Center for Policy Research of New Jersey, reports the state brought in less revenue after its cigarette tax hike than before the tax increase.

Poor Smokers, Poor Quitters, and Cigarette Tax Regressivity
Dr. Dahlia Remler of the Department of Health Policy and Management at Columbia University makes the case that cigarette taxes are regressive, burdening the poorest individuals the most.

Debunking the “Tax Thee, But Not Me” Myth: Five Reasons Why Non-Smokers Should Oppose High Tobacco Taxes
The National Taxpayers Union observes, “The per-capita state and local tax burden in high-tobacco tax states is 8 percent above the national average, while the general tax bill for residents of low-tobacco tax states is 15 percent below the national average.”

Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this and other tax topics, visit The Heartland Institute’s Web site at, Budget & Tax News at, and PolicyBot, Heartland’s free online research database, at

If you have any questions about this issue or The Heartland Institute, please contact Government Relations Director John Nothdurft at [email protected] or 312/377-4000.