In this article, we are going to discuss the 16 states with the most expensive cigarettes in the US. You can skip our detailed analysis of the tobacco market in America, the effect of taxes on smoking, and the rise of smokeless tobacco, and go directly to 5 States With the Most Expensive Cigarettes in the US.
Tobacco was first used by the people of pre-Columbian Americas. Archeological studies suggest that the Maya people of Central America started using tobacco leaves as far back as the 1st century BC, mainly for smoking in sacred and religious ceremonies. By the time Columbus arrived in the New World in 1492, the Native Americans were already cultivating and smoking tobacco in pipes, cigars, and snuff. Although Cristopher Columbus brought with him a few tobacco leaves and seeds back to Europe, most Europeans didn’t get their first taste of the plant until the mid-16th century, when adventurers and diplomats like France’s Jean Nicot – for whom nicotine is named – began to popularize its use. Tobacco was introduced to France in 1556, Portugal in 1558, Spain in 1559, and finally England in 1565. By the early 17th century, smoking was common in all of Europe’s maritime nations, and their colonial empires soon carried tobacco all over the world.
Tobacco Market in America:
According to 2021 figures from the CDC, an estimated 11.5% (28.3 million) of American adults smoked cigarettes. The same year, Grand View Research valued the U.S. tobacco market size at $75.9 billion, expecting it to grow at a CAGR of 3.4% from 2022 to 2030. Due to higher taxation and increasing health awareness, the smoking rate among American adults has dropped significantly over the last few decades. So to keep up with the changing consumer preferences, several manufacturers are marketing many novel offerings like cigars, cigarillos, and next-generation products to expand their profit margin.
The total U.S. annual tobacco consumption was recorded at 237,079 tons in 2020, putting it among the Countries with the Highest Tobacco Consumption.
The Effect of Taxes on Smoking:
Most studies have found that increasing cigarette prices through increased taxation is a highly effective measure to reduce smoking among youth and young adults. From 2001 through 2015, increases in state-level excise taxes were associated with significant declines in prevalence of cigarette smoking, with the strongest effect among young adults aged 18 to 24.
However, this strategy hasn’t been very effective for reducing the smoking prevalence among participants with annual income below $25,000, probably due to their limited exposure to cessation treatment and anti-smoking programs. Poor working conditions are also linked to high smoking prevalence. And as both low- and high-income smokers pay the same amount of cigarette tax per pack, the former spend a disproportionately large share of their income on smoking. Thus, since low-income individuals are price-insensitive, raising cigarette taxes and prices would further deepen income disparities.
The Rise of Smokeless Tobacco:
Traditional oral tobacco products are widely used in the U.S., consumed by an estimated 5.7 million adults in the country. However, contemporary oral tobacco products, like nicotine pouches, are becoming increasingly popular and fall under a brand new category that presents a safer alternative to more conventional oral consumables, such as snuff and snus. As a result, several key industry players are also making inroads into this category.
It was announced earlier this year that Philip Morris International Inc. (NYSE:PM) has completed its 100% takeover of the Stockholm-based nicotine pouch maker Swedish Match, in a deal that cost the tobacco giant around $16 billion. Swedish Match has made huge strides in its relentless pursuit of tobacco harm reduction through its range of smoke-free products, and its leading nicotine pouch product, ZYN, will bolster the Marlboro-maker’s growing smoke-free portfolio of heated tobacco products, e-vapor devices, and oral nicotine products. By 2025, Philip Morris International Inc. (NYSE:PM) aims to be a predominantly smoke-free company, with more than half of its total net revenues coming from its growing portfolio of smoke-free alternatives.
Philip Morris International Inc. (NYSE:PM) is counted among the Best Tobacco and Cigarette Stocks to Buy.
Similarly, the Richmond-based Altria Group, Inc. (NYSE:MO) also entered the oral nicotine pouch market in 2019, when it acquired an 80% stake in the Swiss tobacco company Burger Söhne Holding AG for $372 million, and agreed to start distributing its On! brand in the U.S. Following the acquisition, the number of stores selling On! had already nearly doubled by the end of the following year, as the product was ‘attracting female tobacco consumers due to its spitless, white, and compact format’. As a result, Altria Group, Inc. (NYSE:MO) also acquired the remaining 20% of the On! global business it did not own for approximately $250 million in 2021.
Altria Group, Inc. (NYSE:MO) ranks among the High Dividend Stocks Picked by Billionaire Ray Dalio.
With that said, here are the States that have the Most Expensive Cigarettes in America.
Pixabay/Public Domain
Methodology:
To collect data for this article, we have referred to Wisevoter, looking for States with the Highest Cigarette Prices. The following states have been ranked by their average retail price per pack of cigarettes, inclusive of sales and excise taxes.
If you’re also curious about where the highest quality tobacco is made, here are the Countries that Produce the Best Tobacco in the World.
16. Arizona
Average Retail Price per Pack: $7.51
The adult smoking rate in Arizona has decreased over the years and in 2020, around 13.1% of adults in The Grand Canyon State were smokers against the national average of 15.5%. Although there are fewer adult smokers, the new wave of tobacco use is among children and teens using electronic cigarettes. Arizona banned smoking indoors in public spaces at the state level, but there is no statewide policy for vaping.
15. Wisconsin
Average Retail Price per Pack: $7.93
Cigarette sales in Wisconsin plummeted over the last twenty years, fueled by higher taxes and smoking bans. Just under 193 million packs of cigarettes were sold in the Badger State last year, against 420 million in 2001. During that time span, a statewide smoking ban took effect, cigarette taxes were increased three times, and there was a growth in substitute products like e-cigarettes.
The cigarette tax, totaling $509.79 million, provided 75.2% of general fund excise tax collections in Wisconsin in 2021.
14. New Jersey
Average Retail Price per Pack: $8.06
There hasn’t been a substantial increase in New Jersey’s tobacco tax rate since 2009 and the state currently collects $2.7 in cigarette tax per pack. The American Lung Association recommends raising the cigarette tax by another dollar to reduce smoking rates in the Garden State.
Despite receiving $829.7 million from tobacco settlement payments and tobacco taxes, New Jersey only funds tobacco control efforts at 8.7% of the level recommended by the Centers for Disease Control and Prevention.
New Jersey ranks among the Top 15 States with the Most Expensive Cigarettes.
13. California
Average Retail Price per Pack: $8.14
Since 1998, some of the Golden State’s best-known early childhood services have been funded by an almost ironic source – taxes on cigarettes and other tobacco products. However, the money for the so-called First 5 California programs has plummeted significantly over the years, as from 1989 to 2019, the adult smoking rate in California dropped tremendously from 22% to 10%. One proposed alternative to offset this downward spiral is for the state and local governments to increase the taxes on alcohol instead.
12. Pennsylvania
Average Retail Price per Pack: $8.24
The PA House of Representatives passed House Bill 1300 recently, which would increase the cigarette price markup in the Keystone State. The bill would require tax stampers, wholesalers, and retailers to increase their prices. Unlike a tax, where the higher prices paid by consumers are remitted to the government, price markups allow the sellers to keep the additional revenue as profits.
The cigarette taxes in Pennsylvania are used for the Children’s Health Insurance Program Fund, healthcare initiatives, and farmland preservation.
Pennsylvania sits among the States where Cigarettes are Most Expensive.
11. Washington
Average Retail Price per Pack: $8.57
Cigarette smoking in Washington has declined, but about 14% of the state’s adult population still continues to smoke. The Evergreen State currently collects $3.03 in cigarette taxes per pack, however, over 40% of cigarettes consumed in Washington in 2018 were untaxed due to casual (cross-border shopping) and organized smuggling.
10. Vermont
Average Retail Price per Pack: $8.82
Vermont had an adult smoking rate of 13.3% in 2020 and with a tax rate of $3.08 per pack, the Green Mountain State collected more than $58 million in excise taxes from 18.9 million packs of cigarettes sold in 2022. However, the Vermont Senate Bill 18 proposes to ban all flavored tobacco products in the state, which is estimated to cause a revenue loss of $5.6 million in the first full year following the ban.
Vermont is counted among the Top 10 States with the Most Expensive Cigarettes.
9. Illinois
Average Retail Price per Pack: $8.97
The state of Illinois increased its excise tax rate in 2019, from $1.98 to $2.98 per pack of 20 cigarettes. However, since the surrounding states have considerably lower cigarette taxes, nearly 30% of the cigarettes smoked in Illinois are smuggled into the state illegally.
An estimated 16,600 Illinois residents die from smoking-related diseases each year, and smoking is linked to $4 billion in annual health-care costs and $1.5 billion in Medicaid costs in the Prairie State.
8. Minnesota
Average Retail Price per Pack: $9.13
Taxing tobacco in the Land of 10,000 Lakes amounted to $605 million in 2018 alone, with an estimated $11.5 million coming from vape products. However, with an adult smoking rate of 13%, smoking currently costs Minnesota over $7 billion a year – more than $3 billion in excess health care costs and $4 billion in lost productivity.
7. Hawaii
Average Retail Price per Pack: $9.44
Hawaii has some of the most restrictive cigarette laws in the nation and in 2016, it became the first state to raise the age to buy cigarettes to 21. Hawaii could again set a precedent and become the first state in the nation to ban the sale and possession of tobacco for an entire generation. Senate Bill 148 proposes the ban on tobacco for anyone born on or after 2002. The ban includes traditional cigarettes, cigars, chewing tobacco, e-cigarettes, and vapes.
6. Alaska
Average Retail Price per Pack: $9.55
Alaska is ranked 19th in the U.S. for its cigarette tax of $2 per pack, against the national average of $1.91. However, there are at least 16 local taxes in Alaska, some of which are adjusted for inflation annually and some are collected as a percentage of the wholesale price. Local Alaska tobacco taxes range from none in Kenai to 90% in Sitka, with Anchorage in between at 55%.
The Fairbanks City Council also voted last month to increase the city’s tobacco excise tax from 8% to 20%, after a discussion about effects on public health and local businesses.
The Last Frontier ranks 6th in our list of States with the Highest Prices of Cigarettes.
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Disclosure: None. 16 States With the Most Expensive Cigarettes in the US is originally published on Insider Monkey.