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Cigarette sales down 25% in Oklahoma, tax revenue up

 The Journal Record | July 5, 2019

OKLAHOMA CITY – One year after an additional $1-per-pack tax was applied to cigarettes, sales of the product have dropped 25% in Oklahoma while state revenues from the tax have increased by $133.3 million.

The measure doubled the tax, increasing it from $1.03 to $2.03 per 20-pack effective July 1, 2018. In fiscal 2019, sales fell by 59.6 million packs but revenue from the tax increased to $336.6 million from $232.6 million in fiscal 2018.

Oklahoma State Department of Health Tobacco Manager Christin Kirchendauer said the department did research on similar measures in other states. Kirchendauer said the reduction in sales by almost 60 million packs aligned with expectations.

“This isn’t anything that’s new. We know that this is what works. When you raise the price, that’s the single most effective way to have a significant reduction in the amount of cigarettes being consumed,” Kirchendauer said.

Kirchendauer said the data needs to be analyzed to determine the extent to which the tax played in the sales drop. The full scope of impact will not be known until September.

Additionally, health impacts of decreased smoking are generally long-term, so it will be years before they can be measured.

“What we do know based on what other states have seen and what the research shows is that whenever you raise the price you have fewer people smoking or they smoke less – you have more people who will quit smoking and the rates among youth initiation will decline,” Kirchendauer said.

Oklahoma has had a tobacco tax since 1917. As of January, Oklahoma had the 14th-highest cigarette taxes, with Washington, D.C. topping the rankings at $4.50 and Missouri’s 17 cents the lowest. The federal rate is $1.0066.

In 2016, federal and state taxes made up an average of 44.3% of the retail price of one pack of cigarettes, according to the Tax Foundation.

The tax was part of House Bill 1010xx, an effort to fund teacher pay raises, among other things.

Also included in the bill was a 3-cent motor fuel tax increase on gasoline and an increase of the oil and gas production tax from 2% to 5% for the first five years of production and to 7% after that period.

HB 1010XX passed on March 29, 2018 and went into effect July 1 the same year.

Oklahoma Taxpayers Unite, an interest group that opposed the bill, filed a referendum May 1, 2018 to have the measure put on the November ballot as a veto referendum, but the Oklahoma Supreme Court ruled it legally insufficient and it was struck from the ballot.

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