What Is Proper Tax Policy for Smokeless Tobacco Products?
by Gerald Prante (Please do not cite. An updated version of this study is available at: http://www.taxfoundation.org/publications/show/1858.html.) Fiscal Fact No. 65 While there exist a large literature and extensive policy discussion on the issue of cigarette taxation, smokeless tobacco has received comparatively little attention. In recent years, controversy in many state legislatures has erupted over the proper way of taxing smokeless tobacco. The goal of this Fiscal Fact is to clarify the rationale for excise taxation in general, and specifically to explain the proper method of taxation of smokeless tobacco products and how it compares to cigarette taxation. The Fallacies of Current Tax Policy on Smokeless Tobacco Products Even though the federal government taxes smokeless tobacco at a per unit rate based upon weight, most states tax it based upon the sale price. This can be seen in the following table of the tax rates on smokeless tobacco across the country.
