Iowa Cigarette Tax Increase is a Victory for Kids and Taxpayers
Statement of William V. Corr Executive Director, Campaign for Tobacco-Free Kids
March 14, 2007
Washington, DC — Iowa leaders have taken a vital step to protect the state’s kids and taxpayers from the devastating toll of tobacco by increasing the cigarette tax by $1 to $1.36 per pack. We applaud Governor Chet Culver for his leadership in proposing the cigarette tax increase to reduce smoking and fund essential health care programs, including tobacco prevention, and the Legislature for acting quickly to enact this life-saving proposal. We are also pleased that Iowa’s leaders have made a strong commitment to use the new revenue to fund programs to prevent children from smoking and help smokers quit, and we urge them to follow through on this commitment as they appropriate the new revenue. Together, a higher cigarette tax and well-funded tobacco prevention and cessation programs will have a greater impact in reducing smoking, saving lives and saving money by reducing smoking-caused health care costs.
It is disappointing, however, that the Legislature also changed the tax structure for smokeless tobacco products from a percentage-of-price system to a weight-based system. Over time, this change will reduce the price of the most heavily advertised premium brands of smokeless tobacco products that kids favor, making these products more affordable and even more appealing to children. This change will primarily benefit U.S. Smokeless Tobacco, the principal manufacturer of premium smokeless tobacco, to the detriment of Iowa children.
Nevertheless, a higher cigarette tax is a win-win-win solution for Iowa – a health win that will reduce tobacco use and save lives, a financial win that will raise much-needed revenue and reduce tobacco-caused health care costs, and a political win that is popular with the voters. Iowa can expect a $1 per pack cigarette tax increase to prevent some 38,600 Iowa kids alive today from becoming smokers, save 17,600 Iowans from smoking-caused deaths, produce more than $860 million in long-term health care savings, and raise about $153 million a year in new revenue. Until now, Iowa had been one of only eight states that had not increased its cigarette tax in recent years. Now Iowa can join the other states that have increased cigarette taxes in enjoying the many health and financial benefits. Iowa’s cigarette tax rate will move from 42nd to 17th among the states.
The evidence is clear that increasing the price of cigarettes is one of the most effective ways to reduce smoking, especially among children and pregnant women. Studies show that every 10 percent increase in the price of cigarettes reduces youth smoking by seven percent and overall cigarette consumption by about four percent. Every state that has significantly increased its cigarette tax in recent years has enjoyed substantial increases in revenue, even while reducing cigarette sales.
The next step for Iowa leaders is to allocate a significant portion of the new cigarette tax revenue to increase funding for the state’s tobacco prevention and cessation program. Iowa currently spends $6.5 million a year on tobacco prevention, which is just one-third of the minimum amount of $19.4 million recommended by the U.S. Centers for Disease Control and Prevention. It is only right that Iowa use more of its tobacco money to prevent kids from starting to smoke and help smokers quit.
Tobacco use is the leading preventable cause of death in Iowa, claiming more than 4,500 lives each year and costing the state $1 billion annually in health care bills, including $301 million in Medicaid payments alone. Government expenditures related to tobacco amount to a hidden tax of $602 each year on every Iowa household. In addition, 22.2 percent of Iowa high school students currently smoke, and 4,200 more kids become regular smokers every year. By significantly increasing the cigarette tax, Iowa leaders have taken an important step toward reducing tobacco’s terrible toll.
With the Iowa cigarette tax increase, the average state cigarette tax is now $1.02 per pack. Since January 1, 2002, 43 states, Puerto Rico and the District of Columbia have increased cigarette taxes, some more than once. There are now six states with cigarette taxes of $2 or more and 23 states with cigarette taxes of $1 or more. Chicago has the nation’s highest combined state and local cigarette tax at $3.66 per pack. The seven states that have not increased cigarette taxes since January 1, 2002, are California (87 cents a pack, last increased 1/1/99), Florida (33.9 cents, last increased 7/1/90), Mississippi (18 cents, last increased 6/1/85), Missouri (17 cents, last increased 10/1/93), North Dakota (44 cents, 7/1/93), South Carolina (7 cents, last increased 7/1/77) and Wisconsin (77 cents, last increased 10/1/01).