US: With Proposed Federal Tax Hike, Cigarette Prices in D.C. Could Climb Above $8 Per Pack

Source from:  DCist.com 04/12/2013

As part of his 2014 budget, President Obama has proposed adding 94 cents to the standing $1.01 per-pack federal cigarette tax. The increase—the second in four years—would bring in $78 billion over 10 years, money that would be used for childhood education.

Should the tax pass, smokers in D.C. are going to be looking at cigarette pack prices above $8. Currently, an average pack of smokes in D.C. costs $7.11—the cost of the pack plus a $2.50 per-pack excise tax, six percent sales tax and the $1.01 per-pack federal tax. (The local cigarette tax brought in $35.6 million in the last fiscal year.) If the provision in Obama's budget passes, prices will jump over the $8 mark for the first time.

Of course, a smoker looking to save some money can simply cross into Maryland of Virginia, where average cigarette prices are $6.35 and $4.56, respectively. (In 2011, the average per-pack price nationally was $5.62.) That fact alone helps explain why D.C. cigarette taxes—raised by 50 cents in 2009—has led to decreasing annual revenue: more people are buying elsewhere. D.C. is in the top tier of states when it comes to prices, but below the $10.08 that New York is charging.

Critics of the proposal say that the new tax will be regressive, since a large proportion of smokers are low-income. That certainly holds true in D.C., where smoking rates are higher among African American and uneducated residents. Earlier this week the D.C. Health Exchange Board barred insurers from charging higher premiums for individual and small-group plans purchased through the health exchange that will go into effect in October. The board said that such penalties would fall hardest on the people that most needed to get health insurance. Enditem