Low cigarette taxes cost everyone

Posted on March 24, 2015

Cigarettes are cheap in Louisiana compared to the rest of the country. But the cost of smoking is high. And a large part of those costs are paid by people who don’t smoke.

Cigarette smoking in Louisiana costs taxpayers almost $700 million per year, according to a new report by the Louisiana Budget Project. That comes to $403 for every household in the state – money that is not nearly recouped through the current tax.

Louisiana’s cigarette tax is the third-lowest in the nation at 36 cents a pack. The national average is $1.54 a pack.

If Louisiana raised its tax by $1.25 a pack, it would raise $230 million that could be used to stave off state budget cuts. More importantly, it would help encourage 46,000 adults to quit smoking and keep 36,700 teenagers from taking up the habit. That would lead to $1.57 billion in long-term health care savings, including more than $500 million for Medicaid.

“If there ever was a time to raise the cigarette tax it is now, when Louisiana desperately needs new revenue and smokers need extra encouragement to quit,” said Louisiana Budget Project Director Jan Moller.

Smoking adds $523 million per year in Medicaid costs, $88 million in charity partnership hospital costs and $85 million in costs for state employee and retiree health benefits. Private sector businesses also incur higher health insurance costs and lost productivity because of smoking.

While some policymakers may be tempted to pass a much smaller tax to simply raise revenue, this would be a lost opportunity to improve public health. If policymakers want to create long-term health care savings and save lives in addition to helping the state budget, they should support a $1.25 a pack increase.

The Louisiana Budget Project is a nonprofit organization that monitors and reports on public policies and their effect on low- and moderate-income families in Louisiana.

The full report, “Stronger Cigarette Tax = Healthier Louisiana,” is available by clicking here.

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