Revenues
Increase the Excise Tax on Cigarettes by 50 Cents per Pack
CBO periodically issues a compendium of policy options (called Options for Reducing the Deficit) covering a broad range of issues, as well as separate reports that include options for changing federal tax and spending policies in particular areas. This option appears in one of those publications. The options are derived from many sources and reflect a range of possibilities. For each option, CBO presents an estimate of its effects on the budget but makes no recommendations. Inclusion or exclusion of any particular option does not imply an endorsement or rejection by CBO.
| Billions of dollars | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2015-2019 | 2015-2024 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Change in Outlays | * | * | * | -0.1 | -0.1 | -0.1 | -0.1 | -0.1 | -0.1 | -0.1 | -0.2 | -0.6 | |
| Change in Revenuesa | 3.1 | 3.8 | 3.6 | 3.6 | 3.5 | 3.5 | 3.5 | 3.4 | 3.4 | 3.3 | 17.6 | 34.7 | |
| Net Effect on the Deficit | -3.1 | -3.8 | -3.6 | -3.6 | -3.6 | -3.6 | -3.6 | -3.5 | -3.5 | -3.4 | -17.7 | -35.3 | |
Sources: Staff of the Joint Committee on Taxation; Congressional Budget Office.
Notes: This option would take effect in January 2015. Estimates are relative to CBO’s August 2014 baseline projections. Because excise taxes reduce producers’ and consumers’ income, higher excise taxes would lead to reductions in revenues from income and payroll taxes. The estimates shown here reflect those reductions.
* = between -$50 million and zero.
a. Positive numbers denote an increase in revenues.
Both the federal government and state governments tax tobacco products. Currently, the federal excise tax on cigarettes is $1.01 per pack. This option would raise the federal excise tax on cigarettes by 50 cents per pack beginning in calendar year 2015. That rate increase would also apply to small cigars, which are generally viewed as a close substitute for cigarettes and are currently taxed by the federal government at the same rate as cigarettes.