Research & Commentary: What Effect Would a Tobacco Tax Hike Have on Utah?

Published January 5, 2010

Tobacco tax hikes like the one being discussed in Utah should be recognized for what they are: unstable and regressive tax increases targeting a minority of citizens, fueling unsustainable government spending, all wrapped in one fiscally irresponsible package.

Tobacco tax hikes have at least four fundamental flaws: (1) They are a notoriously unreliable and dwindling source of revenue; (2) they are highly regressive; (3) they discriminate against a minority of the population; and (4) they are embedded into the products’ price to disguise their existence.

Tobacco tax hikes do not resolve budget deficits. Instead, they divert attention from the underlying problems that created the shortfalls in the first place. The more money taken out of Utah taxpayers’ pockets, the more expensive government will inevitably become. Then, as the unsustainable cigarette tax revenue dries up, all taxpayers will be left to pick up a hefty tab.

According to the National Taxpayers Union, “41 of 59 state tobacco tax increases between fiscal years 2001 and 2006 were followed by tax hikes in the two-year period following enactment. In other words, taxpayers faced a 7 out of 10 chance of seeing another net annual tax hike within two years of a tobacco tax increase.”

This correlation between tobacco tax hikes and future tax increases is one reason states with higher tobacco taxes also have higher overall tax burdens. Utah should focus on exercising fiscal restraint and setting good spending priorities, instead of targeting small groups to tax.

The following articles offer information on better ways to fix a budget deficit, the regressive nature of tobacco taxes, the effect of tobacco taxes on nonsmoking taxpayers, and other side effects of cigarette tax hikes.


Smoke Tax: Saddling Smokers with Costs of Health Reform Isn’t Fair
This Salt Lake Tribune editorial explains that a $2 tax on each pack of cigarettes is not equitable and will disproportionately hurt low-income Utahns. The editorial also notes smokers already contribute an enormous sum of money to Utah’s government.

Research & Commentary: The Best and Worst Ways to Eliminate a Budget Deficit
This Research & Commentary provides a concise rundown of “dos and don’ts” for dealing with budget deficits and preventing them from happening in the future.

Research & Commentary: Top Ten Reasons Not to Raise Tobacco Taxes
This Research & Commentary examines how the use of targeted tax increases such as cigarette taxes pushes sound fiscal policies and real budget reforms to the public policy back burner.

Debunking the “Tax Thee, But Not Me” Myth: Five Reasons Why Non-Smokers Should Oppose High Tobacco Taxes
This National Taxpayers Union study found “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.”

Poor Smokers, Poor Quitters, and Cigarette Tax Regressivity
Dr. Dahlia Remler of the Department of Health Policy and Management at Columbia University rebuts the argument that cigarette taxes are not regressive.

Six Reasons Not to Raise Tobacco Taxes
Ph.D. economist William Anderson of the Oklahoma Council of Public Affairs outlines six pitfalls of higher cigarette taxes.

Tobacco: Regulation and Taxation through Litigation
Professor Kip Viscusi breaks down the social costs of smoking, taking into consideration a wide array of factors including health costs, sick leave, and the lower pension and nursing home care costs incurred by smokers.

Cigarette Taxes Are Fueling Organized Crime
Patrick Fleenor, chief economist for the Tax Foundation, shows high cigarette taxes have fueled organized crime and a profitable black market in New York.

Cigarette Tax Burnout
Last year Maryland increased its cigarette tax to $2 a pack in order to fund health care … but now the state’s budget is facing a billion-dollar shortfall. This article describes the budget mess that always results when states rely on cigarette tax revenues even as smoking rates decline.


For further information on the subject, visit the Budget & Tax Issue Suite on The Heartland Institute’s Web site at

Nothing in this message is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. If you have any questions about this issue or the Heartland Web site, contact Legislative Specialist John Nothdurft at 312/377-4000 or [email protected].