A Significant Cigarette Tax Rate Increase in Louisiana Would Produce a Large Increase in State Tobacco Tax Revenues

This Report was written by Frank J. Chaloupka. The report assesses the potential impact of raising cigarette taxes in Louisiana on government tax revenues. In 2016, the last time Louisiana raised its cigarette tax rate, tax revenues increased sharply and stayed at a relatively high level since. The study finds that increasing cigarette taxes by $1.50 per pack would raise an additional $165.97 million in new tax revenues in the first year following the tax increase and more than $100 million in additional revenues five years after the increase. Louisiana would receive more than $750 million in new annual revenues in the five-year period compared to the revenue in 2024, even as cigarette sales would decline by 5.5% each year. Strengthening tax administration and supply side oversight would significantly reduce any tax avoidance or evasion that this tax increase may prompt. The report concludes with recommendations for Louisiana to increase its cigarette tax rate to reap the fiscal benefits, as well as the associated public health benefits.