With budget deficits looming, state officials across the country have turned to increasing their state’s cigarette tax, as well as other tobacco hikes.
“In 2025, tobacco tax increase legislation is being considered in over half of the states,” said David Spross, executive director of the National Association of Tobacco Outlets in Washington, D.C. “This uptick is a change from the last few years where only a handful of states have considered increased tobacco taxes.”
In recent years, almost every state and the federal government have increased tobacco taxes, according to the Campaign for Tobacco-Free Kids website.
“As of Jan. 1, the average state cigarette tax is $1.97 per pack,” according to the organization’s website. “Some localities have an additional excise tax on top of the state tax.”
CSP examined a few states to pinpoint what they are readying or considering when it comes to a cigarette tax hike.
Indiana
As state officials grapple with an anticipated budget deficit, retailers in the Hoosier state are bracing for a $2 per pack increase in the state cigarette tax. The increase will take effect July 1, bringing Indiana’s cigarette tax rate to just under $3 per pack. Indiana’s cigarette tax will go from $0.995 to $2.99, which is a percentage increase of just over 200%.
“This tax increase will continue to put financial strain on our adult tobacco consumers,” said Damian Wyatt, vice president of retail, purchasing and merchandising for Greenfield, Indiana-based Leo’s Market & Eatery. Leo’s has convenience stores in Lafayette, Greenfield, Noblesville, McCordsville and Indianapolis, Indiana.
Wyatt, who previously worked with convenience-store retailer MAPCO for nearly 20 years, said he is trying to stay positive when it comes to what adult tobacco consumers will do once the increase takes effect.
“We are hopeful they continue to migrate within other nicotine alternative means,” he said.
When it comes to tobacco and nicotine taxes, Spross told CSP that they are unreliable and declining sources of revenue.
“Dramatic tax hikes, like Indiana, will expand the illicit market and push adult consumers to make their purchases across state lines,” he said. “Further, increasing taxes on nicotine products, such as pouches discourages adult combustible users from trying or continuing to use less risky nicotine products.”
Gus Kostas Olympidis, president and CEO of Family Express Corp., which has convenience stores in the northwest and north central Indiana area, told CSP that no one likes tax increases. But he said the consumer “doesn’t differentiate between tax increases and multiple manufacture price increases several times a year.”
“This perpetual reality makes it hard to effectively advocate against tax increases,” said Olympidis, who founded Family Express, the Valparaiso, Indiana-based regional chain of foodservice-focused c-stores that now has 84 locations in Indiana.
Indiana Chamber of Commerce President and CEO Vanessa Green Sinders, on the other hand, welcomed the cigarette tax increase.
“The Indiana Chamber has been advocating for an increase in the cigarette tax for nearly 15 years,” she said in a statement.
With budget deficits looming, Indiana isn’t the only state looking to include tax increases in their state budget.
“This year, governors in Ohio, Michigan, New Jersey, Rhode Island, Massachusetts and Maine included tobacco tax increases in their state budget proposals,” said Spross.
Maine
The Maine Public Health Association (MPHA) reported on Wednesday that the joint standing committee on appropriations and financial affairs voted to include a $1.50 increase of the cigarette tax, with a corresponding tax increase for other tobacco products, in the state budget proposal.
The move raises the tax to $3.50 per pack of 20 cigarettes.
If signed into law, MPHA said this will mark the first time Maine has raised its tobacco tax in 20 years.
“This was a difficult budget to put together,” said Maine Gov. Janet Mills in a statement. “Our economy is strong, but our revenues are leveling-off, and while prior legislatures have made many important and worthwhile investments, we have to consider what we can sustain in this budget cycle.”
Matthew Wellington, associate director of MPHA said in a statement that, “raising the tobacco tax is an evidence-based policy that reduces youth tobacco use and helps ensure that the next generation of Maine youth grows up free from tobacco addiction and harm.”
Delaware
In the state of Delaware, lawmakers last week introduced new legislation that would increase the state’s tobacco tax and update its tobacco licensing system.
Sponsored by House Speaker Melissa Minor-Brown and Senate Pro Tempore Dave Sokola, House Bill 215 would raise taxes on cigarettes, vapor products, and other tobacco items, while updating tobacco licensing fees.
House Bill 215 is an “important step in ensuring that our future generations don’t pick up a cigarette or a vape and begin the long and painful journey into addiction,” Minor-Brown said in a June 6 statement. “This legislation isn’t just about keeping us in line with other state tax structures, it’s about saving lives.”
Delaware’s current tobacco tax is among the lowest in the region at $2.10 per pack of 20 cigarettes. In comparison, Pennsylvania’s tax is $2.60, New Jersey’s is $2.70, Maryland’s is $5 and New York’s is $5.35, which is the highest in the nation.
Federal level
On the federal level, Democrats in March reintroduced legislation to establish a new federal e-cigarette tax, increase the tobacco tax rate and close tax loopholes.
U.S. Senate Democratic Whip Dick Durbin of Illinois and U.S. Sen. Ron Wyden, (D-Oregon), together with U.S. Rep. Raja Krishnamoorthi (D-Illinois) and five other senate Democrats, backed the End Tobacco Loopholes Act, which would follow the lead of 30 states and Washington, D.C., that have set their own state taxes, by setting a federal tax on these vaping products.
Durbin said the bill would close tax code loopholes for tobacco products by increasing the federal tax rate on cigarettes, pegging it to inflation and setting the federal tax rate for all other tobacco products at the same level.
“The legislation also closes numerous tax and regulatory loopholes that the tobacco industry has exploited for large cigars, smokeless tobacco, and pipe tobacco by shifting production and sale schemes to avoid taxes and oversight, resulting in nearly $4 billion in lost federal revenue between 2009 and 2018,” Durbin said in a statement.
According to Durbin, large cigars, smokeless tobacco and pipe tobacco remain undertaxed compared to cigarettes.
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