Cigarette Taxes in Ohio
January 1, 2016
Finance & Accounting
externalities, taxes, health economics, elasticity
Business Case Journal
In 2015, Ohio’s Governor Kasich proposed a budget that would reduce the state’s income tax for both businesses and individual taxpayers. To offset this reduction in income tax collections, Governor Kasich proposed broadening and raising other taxes – including taxes on cigarettes. The increase in cigarette and tobacco taxes was a substantial component of the proposal by generating $1 billion in increased revenue for the State. Because of the importance of the cigarette excise tax in the budget proposal, questions remained about the estimates. Was Governor Kasich’s estimate realistic? Would consumers cross the border to purchase lower-taxed cigarettes? What would be the long-term health consequences for a reduction in smoking rates? How would the combination of these and other factors affect Ohio’s fiscal outlook?