Are cigarettes going up in price in 2022?

The tobacco industry has bumped up the prices for its products beyond that required by tax changes, even when tax rises were large and unexpected, reveal the findings of research published online in the journal Tobacco Control.

‘Roll your own’ tobacco had the highest industry driven price rises, despite higher levels of illicit trade for these products.

This refutes industry’s stated concerns that price rises fuel the illicit tobacco trade⎼an argument they have used to lobby against tax hikes, say the researchers.

Before 2010 the tobacco industry regularly bumped up cigarette prices over and above the level required by tax rises, accounting for almost 50% of the total price increase in the UK.

Since then manufactured cigarette sales have fallen by 17%, while sales of cheaper ‘roll your own’ have increased by 46%.

But the government has been reluctant to increase taxes  further on ‘roll your own’ tobacco for fear of pushing smokers towards the illegal market, which is already larger than that for manufactured cigarettes.

To explore the extent to which price rises since 2010 have been due to  tax increases or industry strategies to boost profits, the researchers analysed UK data on inflation, tax rates, and sales of ‘roll your own’ tobacco and manufactured cigarettes between 2010 and 2015.

Between 2010-2012 there were large and unexpected tax increases, and industry-driven price changes were small, accounting for 16% and 20%, respectively, of the price increase in manufactured and ‘roll your own’ tobacco. Changes were similar across pack sizes and quality.  

But in 2013-2015, when tax increases were smaller and planned, almost a third (33%) of the price increase for manufactured cigarettes was industry-driven, rising to nearly half (48%) of the price hike for ‘roll your own’ tobacco. 

“This implies that the industry does not believe [its] own argument that higher taxes/prices encourage illicit tobacco purchasing. This is further supported by a higher proportion of the total price increase being attributable to industry revenue increases for ‘roll your own’, despite the illicit market share for ‘roll your own’ being substantially higher,” they write.

Much larger absolute tax and price increases were applied to premium brands for both manufactured cigarettes and ‘roll your own’ tobacco.

But industry extended this price differential further by raising the consumer price considerably above the cost of the tax increase, known as ‘overshifting,' on more expensive products, and by absorbing the tax hike, known as ‘undershifting,’ on cheaper products, resulting in a more than threefold difference in price increase.

“The ability of the industry to do this is bad for public health as it means smokers are not faced with a quit-inducing sudden jump in retail prices,” note the researchers.

The findings also suggest that there is still scope to further increase taxes, even in a high tax and high price environment like the UK, they suggest.

“If the tobacco industry is still able to increase its revenue (and hence profits) per pack, then the government should be able to further increase taxes to deal with the harms from tobacco,” the researchers write.

Such increases should be sudden and unexpected for maximum impact, they advise.

“Unexpected and large tax increases compromise the tobacco’s industry ability to manipulate prices, and hence should become a key feature of tobacco taxation.”

The average cost of a pack of cigarettes in the United States is $8.00, with average prices ranging from $6.11 (Missouri) to $11.96 (New York). The median price for a pack of cigarettes is $7.93. With 20 cigarettes per pack, the average cigarette costs between $0.31 and $0.60. Both the median and the average cost of a cigarette in the United States is $0.40.

Eleven states, along with the District of Columbia, have an average price above $10 per pack. Twenty-eight states have an average price that falls below the $8 national average.

The states with the highest cigarette prices are:

*Were the District of Columbia included in this metric, it would have the nation’s second-most expensive pack price at $11.75.

The states with the lowest cigarette prices are:

Overall, the average price of cigarettes is on the rise in the United States, with an average increase of $1.50 per pack since 2018.

Average Annual Costs

According to The American Lung Association, The average daily smoker smokes 15 cigarettes a day. The price of this habit sits at a national average of $6 a day, or $2,190 per year. In New York, the average smoker would spend $8.97 per day, or $3,274.04 every year. In Missouri, the cheapest state for smokers, the average daily smoker would spend $4.58 a day, or $1672.61 per year.

Geographical Trends

Geographically, high cigarette prices tend to be concentrated in states along the northern coasts, such as New York and Washington D.C. in the Mid-Atlantic region, Rhode Island and Connecticut in the “New England” area, Illinois and Wisconsin along the Great Lakes in the upper Midwest, and Washington, Oregon, and California on the West Coast. The non-contiguous states, Hawaii and Alaska, are also home to some of the nation’s highest cigarette prices.

The lowest prices are generally concentrated in the Southern and Great Plains regions, where all states have an average price below the national average.

Taxation & Cigarettes

Cigarettes are taxed on both the federal and state levels and, in some instances, are subject to local and state sales tax as well. The federal tax rate on cigarettes is $1.01 per pack of 20 cigarettes and has remained steady since 2009. There have, however, been recent calls to increase the federal tax on tobacco products.

Each state also imposes a state tax on cigarettes, with an average of $1.91 per pack. Cigarette taxes range from $0.17 per pack in Missouri to $4.35 per pack in New York. Roughly half of states have increased the tax rate rate on cigarettes since 2012, with the greatest increases since 2018 occurring in Oregon, Maryland, and Colorado.

Cigarettes may also be taxed locally, at the city and county levels. According to Tobacco Free Kids, Chicago, Illinois has the highest combined state-local tax rate at $7.16, with Evanston, Illinois coming in second at $6.48 per pack.

Several states have also implemented minimum pricing laws. In Colorado, for example, the current minimum price per pack of cigarettes is $7, with that floor set to raise to $7.50 by 2024.

Proponents of tax increases claim that higher taxes lead to a decrease in smoking rates and increased revenues. According to The American Lung Cancer Association, for every 10 percent increase in the price of cigarettes, consumption drops by four percent among adults and seven percent among youth.

Additionally, states rely on the revenues from cigarettes to boost their general funds. According to Statista.com, total revenues from tobacco taxes in 2020 came to 12.35 billion dollars. At the federal level, this money goes to supporting health initiatives like The Children’s Health Insurance Program (CHIP). At the state level, these funds are often used to support health initiatives, education, and smoking cessation programs.

Prevalence of Smoking

According to the CDC, approximately 14% of U.S. adults smoke regularly, with rates among males slightly higher than among females. Smoking levels tend to be higher in regions where cigarettes are cheaper.

While smoking levels have been declining for the past several decades, the Federal Trade Commission reported that cigarette sales were slightly up in 2020. However, the downward trend is expected to continue.

Cigarettes & Health

Smoking is a health risk. According to the CDC, smoking harms nearly every organ of the body and is a leading cause of premature death in the United States, contributing to over 480,000 deaths a year.

Smoking cigarettes causes cancer, heart disease, lung disease, diabetes, stroke, and chronic obstructive pulmonary disease (COPD). Smokers are also at increased risk for tuberculosis, immune system problems, certain eye diseases, and tooth loss.

Illness related to smoking costs the country over $300 billion each year. Nationally, these healthcare costs average out to $17.26 per pack.

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