Excise tax on tobacco products

In 2025, excise taxes on tobacco products are estimated at $2.79 per pack, reflecting a 6.9% decline from the previous year. This decrease occurs amid fluctuations in state-level tax adjustments and evolving consumer behavior. The tobacco excise tax continues to serve as a pivotal public health tool aimed at reducing consumption, particularly among youth, and is a key fiscal resource at federal, state, and local levels. Disparities in taxation between cigarettes and other tobacco products continue to drive some smokers toward non-cigarette alternatives, including smokeless tobacco and vapor products.

From 2020 to 2025, state-level excise taxes on tobacco have experienced ongoing movement due to public health policy and state revenue needs. The average state-level tax on cigarettes reached $1.91 per pack in 2021, with significant variation. Tax increases in states like Colorado, Maryland, and Oregon in 2021 contributed to an upward trend. However, some years have seen limited changes, as in 2020 when Virginia was the only state to increase taxes. Higher taxes on cigarettes have shifted demand toward lower-taxed alternatives, highlighting gaps in tax policy between product categories. Federal tobacco excise tax rates have remained at $1.01 per pack since last adjusted in 2009, resulting in fewer federal influences on fluctuations. The excise tax environment has been shaped by policy inertia at the federal level and frequent state-level activity, with localities such as New York City enacting additional levies.

Macroeconomic and regulatory factors have also influenced dynamics between 2020 and 2025. Rising healthcare costs and state budget pressures have advocated for higher tobacco excise taxes. The introduction of the Tobacco Tax Equity Act in 2021 and its reintroduction in 2023 indicate a trend toward harmonizing taxes across tobacco products. These developments underscore the effectiveness of excise taxes in reducing smoking rates, particularly among young people, and highlight broad public support as a revenue measure. Excise taxes remain a central tobacco control strategy.

Over the five years to 2025, the excise tax on tobacco products has generally increased, driven by state-level legislation and the push for equitable taxation across tobacco categories. Although average annual growth contracted slightly at -0.5%, the tax regime remains dynamic, influencing both consumer behavior and government revenues.