NY cigarette tax puffs up prices

Cigarette packs are on display for sale in a shop in New York City.

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Kai Ryssdal: The state of New York is trying to close a multi-billion dollar hole in its budget. So as part of the emergency spending bill that the legislature passed yesterday, the cigarette tax in the Empire State is going to go up to $4.36 a pack. That means New Yorkers will be paying upwards of $9 a pack -- almost $11 when you add in city taxes. Seems like an easy answer for lawmakers, in terms of raising revenue while pushing smokers to quit. And so you'd think all the other states would be racing to follow New York's lead.

Marketplace's Jeremy Hobson explains not so.


Jeremy Hobson: On the streets of midtown Manhattan today, we wanted to see if $11 a pack will cause smokers to cut back.

Here's 36-year-old Laura Doure.

Laura Doure: Ultimately, I'd like to say that it would make me smoke less, but it just doesn't. It just makes me go more broke.

And here's 46-year-old Gregory Bear.

Gregory BearI will have to cut down, just because my wife will kill me if I don't. That's what it comes down to.

There's no question about the effectiveness of cigarette taxes for Peter Fisher. He's the vice president for state issues at the Campaign for Tobacco Free Kids.

Peter Fisher: For every 10 percent increase in the price of a pack of cigarettes, you would normally expect to see about a 7 percent decline in youth smoking and a 2 percent decline in adult smoking.

And Fisher says cigarette taxes do a fine job filling budget gaps, too. He says states have raised tobacco taxes more than 100 times in the past 10 years.

Fisher: You know some states like New York, like New Mexico, have increased their taxes multiple times in that period so the vast majority of states have taken this action.

As for the ones that haven't gone as far as New York, Fisher says smokers are voters too -- and 20 percent of Americans smoke.

Bert Waisanen studies state budgets at the National Conference of State Legislatures. He says for many states, a tobacco tax hike can't solve a budget crisis.

Bert Waisanen: Tobacco taxes might be, you know, 4 percent or 5 percent of state revenue, so they're not a major source of revenue.

Of course, some states rely on the tobacco industry for jobs. North Carolina claims 255,000 of its jobs are tobacco related. It has one of the lowest tobacco taxes in the nation at 45 cents a pack.

In New York, I'm Jeremy Hobson for Marketplace.

About the author

Jeremy Hobson is host of Marketplace Morning Report, where he looks at business news from a global perspective to prepare listeners for the day ahead.

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