The increase in the state’s tobacco tax is driving down sales of cigarettes in Iowa. The Department of Revenue and Finance reports a 32 percent decline in the last three months. Department researcher Mike Lipsman says that’s exactly what they predicted when the legislature raised the cigarette tax a dollar a pack.
Lipsman says he expects a one-percent decrease in demand per year. Governor Chet Culver says he’s thrilled with the results, even if it eventually means less tax revenue for the state. "If people quit smoking entirely, that would be a great thing," Culver said. Lipsman says the decline of cigarette sales in Iowa is a combination of some people giving up the habit and some people buying their smokes elsewhere.
"We estimate we would see about a 20 percent drop in demand due to the higher price," Lipsman said, "and then maybe another 10 percent due to evasion activities, like buying over the internet, or people in the Quad Cities going to Illinois, or in Council Bluffs going to Omaha." Despite the decline in the number of packs sold, the state saw a dramatic increase in tax revenue from cigarettes. In July, August, and September the state collected $58 million dollars – a 157 percent increase over the same period last year.