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That burning sensation District smokers just felt in their pockets was their wallets losing a little cash. Higher taxes on tobacco products are set to go into effect this fall under a new budget measure lawmakers advanced on Tuesday.
In a 10-2 vote, a supermajority of the D.C. Council approved an amendment proposed by Ward 7 Councilmember Vince Gray that would raise the tax on cigarettes by $2 per pack. This change would make the District’s tax on cigarettes the highest among U.S. states, and one of the highest among major U.S. cities.
Currently, the tax rate is $2.50 per pack, so it would go up to $4.50 per pack when fiscal year 2019 begins in October. And since a surtax of 44 cents on cigarettes also applies in D.C., the effective excise tax rate for tobacco products would jump to $4.94.
The budget, which the Council must vote on for a second time in the next few weeks, would put the District ahead of New York and Connecticut for state-level taxes on tobacco products. Both of those states currently have cigarette tax rates of $4.35 per pack, while Rhode Island has a cigarette tax rate of $4.25 per pack, according to the Tax Foundation and the Campaign for Tobacco-Free Kids, which track cigarette taxes nationally.
The pending increase would also put the District even farther ahead of Maryland and Virginia on cigarette taxes than it is today. Maryland charges a tax of $2 per pack, while Virginia only charges 30 cents in tax.
But when considering combined state and local taxes on cigarettes, D.C. would continue to rank below cities including Chicago, New York, and Juneau, which charge $6.16, $5.85, and $5.00 per pack, respectively.
The raise would also apply to other products like e-cigarettes and pipe tobacco because the District has had a parity law governing vaping products since 2015. It triggers an automatic increase in taxes on those products whenever the cigarette tax rate goes up.
In addition, the budget provision would bring to bear an on-the-books law that elevated the legal age for buying tobacco products in D.C. to 21, but that has not been implemented yet because the District had not identified the funding needed to offset the loss in tax revenue from purchases by 18- to 21-year-olds. D.C. expects to generate $5.2 million in revenue from the higher cigarette taxes next fiscal year.
Public health advocates praised the move. “The data has shown that every time there is a significant increase in the tobacco tax the smoking rate has decreased while the revenue for the state has increased,” said Deborah P. Brown of the American Lung Association, in a statement. “This move is a win-win for the District of Columbia.”
The American Lung Association is part of the Raise It For Health DC Coalition, which has fought for the change. The group includes the American Cancer Society Cancer Action Network (ACS CAN), the American Heart Association, Breathe DC, the Campaign for Tobacco-Free Kids, the DC Fiscal Policy Institute, and March of Dimes.
D.C. councilmembers who supported the increase said it would help reduce the prevalence of smoking in the District, especially among youth. “Teenagers are particularly price-sensitive,” Ward 3 Councilmember Mary Cheh said. She said youth would be less likely than adults to leave D.C. to buy tobacco products and that research shows that if people do not smoke before they turn 18, “they probably won’t smoke” later in life.
Gray, who chairs the Council’s health committee, said the revenue from the higher tax rate would in part fund smoking cessation efforts by the DC Department of Health. He described taxes as “the most effective, time-tested manner” to decrease smoking rates and noted that CVS Health chose to stop selling tobacco products in 2014. “I have heard no complaints about the CVS decision,” said Gray.
Council Chairman Phil Mendelson and Ward 2 Councilmember Jack Evans, who chairs the Council’s committee on finance and revenue, voted against the change. (Ward 8 Councilmember Trayon White was absent.) Evans had also opposed the measure at a committee mark-up earlier this month, when Gray attempted to advance it. At that stage, it failed 3-2, with At-Large Councilmember Robert White and Ward 5 Councilmember Kenyan McDuffie also voting no.
While Robert White and McDuffie flipped their previous votes to yeses on Tuesday, Evans reiterated his arguments that higher taxes could lead to cigarette-bootlegging and suggested that small vendors would likely lose business. “People who smoke are going to smoke,” Evans said. (Following the vote, the Tax Foundation outlined other potential negatives of the change.)
Mendelson, who noted that he had supported a ban on smoking in restaurants and workplaces more than a decade ago, said the proposal went in “the wrong direction” for regulating tobacco use. “Yes, we want to discourage it,” he said. “But in a sense this is a punitive approach. People will go elsewhere … to get their cigarettes.”