On April 1st the federal cigarette sin tax rate increased from $.39 to $1.01 a pack. It is estimated that the sin tax will lead to a decrease in youth lighting up and an increase in the number of adults who quit smoking. Always one to be interested in the data behind the numbers, I took a deeper look into the tax revenue potential of the sin tax increase by state.
I loaded the percentage of smokers by state into an online database and used calculated formulas to determine what the revenue impact would be if these smokers smoked a pack a day or a pack a week. By my rough estimates, the annual federal revenue potential would be $22 billion if all U.S. smokers smoked a pack a day or $3 billion if they smoked a pack a week.
Below is the list of the top ten states with the greatest number of smokers. If you’d like to look at a more comprehensive list of all 50 states, click here.
This got me thinking. What would the revenue potential be if the sin tax was assessed on cigarettes sold in two of the countries (China and India) with the highest number of smokers?
Any way you slice it, the numbers are staggering. Sin taxes are nothing new and have been around since the 1500s. The Freakonomics blog had an interesting conversation on taxing video games. I’m curious. What do you think will be taxed in the future as a sin tax?
