Federal, state and local governments impose cigarette taxes.
As of 2010, the federal government imposes an excise tax at $1.01 per pack. This tax goes to the State Children's Health Insurance Program (SCHIP), which uses the revenue to expand children's health care coverage. SCHIP began in 1997 and applies to families who do not qualify for Medicaid. Despite two unsuccessful attempts to expand the law, Congress passed legislation in January 2009 that doubled the cigarette tax. In addition to federal cigarette tax law, state and local governments also impose cigarette taxes to generate revenue.
SCHIP Legislative History
The 1997 Balanced Budget Act included H.R. 2015 (SCHIP), with 270 votes in favor and 162 opposed in the House of Representatives. The Senate passed the same bill unanimously. The program began with a $0.39 tax per pack of cigarettes.
First Veto
Congress tried to expand the program to cover an additional four million children by 2010, but then-President George W. Bush vetoed the bill. The Democratic-controlled Congress unsuccessfully tried to override President Bush's veto, which requires two-thirds of both the House and Senate to vote in favor. The effort was 13 votes short.
Second Veto
Congress again passed a similar bill to expand the program, but Bush vetoed the bill once again. In January 2008, Congress attempted to override the veto. This effort to override Bush's veto also failed.
Expansion
After President Barack Obama was elected, Congress once again passed legislation that would expand the program to four million additional uninsured kids. The bill passed easily and President Obama signed it into law on Feb. 4, 2009. The new law raised the taxes on cigarettes by $0.62 to a total of $1.01 per pack.
State Laws
State and local governments have additional cigarette tax laws. Different states assess different levels of taxes against cigarettes. Some use the funds for general revenue. Other states use the funds for special projects. As of 2010, Rhode Island imposes the highest cigarette tax at $3.49 a pack. Missouri, however, assesses the smallest cigarette tax at $0.17 per pack. Missouri is 51st in a ranking of all 50 states and the District of Columbia. The average cigarette tax in the same ranking is $1.42. Major tobacco-producing states--South Carolina, Virginia, Kentucky, Georgia, Tennessee and North Carolina--average $0.48 per pack, while all other states average $1.54 a pack. City and county governments can impose additional taxes on cigarettes. New York City, for example, has a combined state and local cigarette tax of $4.25 per pack.
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