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Approximately 26.5 billion packs of cigarettes are sold in the United States every year. That
equates to 840 packs per second. Currently, smoking Americans pay 24 cents federal tax on every pack of
cigarettes they buy. The Senate voted Friday, June 27, 1997 to raise cigarette taxes by 20 cents per pack.
The additional taxes will be used to finance a new healthcare program for America’s 5 million uninsured
children. The President rolled out his tax-cut plan today, June 30, 1997. Mr. Clinton’s plan also raises
cigarette taxes by 20 cents per pack. The proceeds from his proposed tax increase would also fund
children’s health programs. However, as pointed out by CQ Staff writer Alissa J. Rubin in the June 23,
1997 issue of Congressional Quarterly, not all the proceeds raised by this tax will go to fund children’s
health programs.
The proposed tax increase on cigarettes is expected to raise approximately $15 billion over a five
year time period. According to the Senate Finance Committee’s version of this tax proposal, about one half
of that amount will go into block grants to the states for children’s health care. Nearly $3.5 billion would
go to reducing the airline ticket taxes on international flights. Another $800 million would boost the capital
gains tax break for real estate, and $3 billion dollars would be used to increase the number of working poor
families who would be eligible for the $500 per child tax credit.


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The burning economic issue concerning the proposed cigarette taxes is not the amount of the tax,
but the idea that the government is slipping this tax rease into a tax-cut package. The senate is trying to
finance an $85 billion tax-
cut over the next five years. The tax-cut would not be possible without being able to off-set the anticipated
airline and capitol gains taxes with the money generated from the cigarette tax increase. The government
also wants to fund child healthcare programs, yet they cannot fund these block programs without a tax
increase.
During the period of 1972-95, the Legislature increased the Cigarette tax rate three times.
Washington’s own tax is the highest at 81.5 cents per pack. In 1972, Cigarette and Tobacco Products tax
collections totaled $232 million. By end of 1997, they should reach $593 million, yielding a 3.8 percent
average annual growth rate. For the 1992-1997 period, however, the average annual growth rate is
expected to remain virtually flat, at 0.4 percent. Almost all of the growth in this revenue source stems from
rate increases. Because of decreasing consumption, the underlying base has gradually eroded. In fact,
during the period of 1983-95, the base has decreased at 2.1 percent average annual rate.
Health concerns, price increases, and changing social attitudes have contributed to the decline in
consumption. Yet still estimates show that unless teen smoking rates are cut immediately, more than 5
million young people under age 18 who are alive today will die from a smoking-related disease. These
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deaths could result in almost $200 billion in future health care costs and about 64 million years of life lost
for the youth of this nation. More than 5 million children living today will die prematurely because of the
decision they will make as adolescents, the decision to smoke cigarettes.
In 1994, 48 million adults 18 years of age and older (25.3 million men, 22.7 million women) were
current smokers in the United States. Smoking among adults decreases dramatically from 42% in 1965 to
26% in 1994. During this period, smoking among the adult male population declined from 52% to 28%,
adult female smoking declined from 34% to 23%.
Smoking foes say higher taxes on cigarettes are justified by the costs incurred by government in
paying for smoking-related illnesses. But government already collects about 5 billion more in cigarette
taxes than it is estimated to incur in such costs. The new cigarette tax, aimed at providing health care to
persons too poor to buy their own insurance, would fall most heavily on the poor and disadvantaged. One
reason economic theory suggests selective excise taxes generally are not desirable is that they distort
individual choices among goods and services in the market and interfere with efficient resource allocation.
A cigarette tax, may be desirable if it compensates for burdens that smokers impose on others or